Discuss and describe the significance of diversification in context of stock markets using appropriate numerical illustrations.
Mimine and Minush are two companies with the following dividend and market price per share (MP) for period 2000-2005
i. Compute the average return and risk for the above shares. Demonstrate clearly your calculation. Interprete your results.
ii. Compute the portfolio return if an investor decides to make a portfolio with equal weight.
iii. If the correlation coefficient is -0.5 compute the portfolio risk. Comment on your answer.
Make a distinction between systematic and unsystematic risk.