Project Case Study Analysis
Comment on the similarities and differences
Similarities
Adobe Systems, Microsoft Corp and Oracle Corp. are American based multinational technology corporations with the highest market capitalization and revenues. These software companies are strong with increased share price.
Differences
The difference between software indexes is that these companies are traded in the US with other financial organizations. Also, Microsoft is riskier than Adobe Systems and Oracle Corp. due to the price volatility and high concentration.
Portfolio weights of ADBE, MSFT, and ORCL
The percentage of the investment portfolio for each stock is calculated using the formula provided below:
= Stock Value / Total portfolio value x 100
Currently, the percentage of the investment portfolio of ADBE, MSFT, and ORCL is 2.05%, 1.80% and 0.84%. The stock ADBE has the highest weight value of 2.05% of the total portfolio, whereas stock MSFT has a weight value of 1.80 % of the total portfolio and stock ORCL has a lowest weight value of 0.84% of the total portfolio.
Historical performance of three market indexes
Monthly returns for NDX, RUT, and SPX
The monthly returns for ADBE, MSFT, and ORCL are as follows;
| Returns | SPX | NDX | RUT |
| Mean return | 1577.40 | 3045.20 | 859.21 |
| Standard deviation | 589.73566 | 1928.1885 | 367.55536 |
| Lowest return | 735.09 | 832.52 | 360.52 |
| Highest returns | 3221.29 | 8709.73 | 1740.75 |
| Sample pair-wise correlations | 0.9270961 | 0.9409469 | 0.8953717 |
The mean return of SPX is higher than NDX&RUT which means that the SPX generates more return on a monthly basis than NDX & RUT. Another market index that delivers higher returns is NDX. The least return market index is RUTwith 859.21 mean value.
The standard deviation of NDX is higher than SPX &RUT i.e. 1928.18 which means that the values are spread out over the wider range than SPX & RUT. Another market index whose values are close to the mean is of RUTwith a 367.55 mean value.
RUT has the lowest return of 360.52 while SPX & NDX havethe lowest return of 735 and832 respectively. On the other hand, NDX has the highest return of 8709.73, while SPX & RUT havethe highest returns of 3221.29 & 1740.75 respectively.
The correlation of NDX is 0.94 which shows a strong relationship between stock prices and market indexes and the price of the stock would increase with market indexes. The correlation of SPX is 0.92 which shows a strong relationship between stock prices and market indexes and the price of the stock would increase with market indexes. The correlation of RUT is 0.89 which shows a strong relationship between stock prices and market indexes and the price of the stock would increase with market indexes.
Portfolio Value
If I had invested $1 at the beginning of the period in the SPX index, the amount I would have at the end of the period would be 2.19. Whereas I had invested $1 at the beginning of the period in NDX&RUTindexes. The amount I would have at the end of the period would be 2.34 and 3.29 respectively.
Comment on the similarities and differences
Similarities
S&P 500, NASDAQ 100and the Russell 2000 are the popular indexes. Another point of similarity is that all these indexes actively traded on US based companies.
Differences
S&P 500 has the largest 500 publicly traded companies in the United States, whereas NASDAQ 100 is made up of 103 equity securities issued by 100 non-financial organizations and Russell 2000 is a small capitalization stock market index with 2000 smallest stocks. S&P 500 most likely captures about 80 percent coverage of the overall United States market capitalization. NASDAQ 100 heavily weighted in the sector of technology which typically experiences high volatility and high growth. . Russell 2000 is a common benchmark for the small capitalized portfolio and it is monitor by investors to gauge the performance of domestically-focused and small companies. NASDAQ is more volatile than S&P and Russell because of its high concentration in high growth and riskier companies................................
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