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Portfolio of 20 Listed Stocks For Trading For Beginners' to Raise Funds

Question :

You are asked to assume as a beginner in working for a fund and your chief investment officer desires to spend your first working week for investigating the returns over previous 10 years for a passive and active investment strategy. Assume you have just begun working for a fund and your Chief Investment Officer (CIO) wants you to spend your first working week investigating the returns over the last 10 years for a passive and active investment strategy.

• Design a passive strategy, i.e. an index of the risk-free rate and a broad stock market index in a country of your choice from 2007–2016. Calculate your passive returns each calendar year over the period January 2007 to December 2016.
• Design a diversified portfolio of 20 listed stocks (i.e. in the same country/exchange(s) as 1. above and equally-weighted at the beginning e.g. in December 2006), that you will select as of December 2006 and actively trade as of January 2007 until December 2016.

INTRODUCTION

To analyze the market which will be adequate and helpful to businesses in relation with making the appropriate operational practices as well as determination of the market strength of entities. To determine the capital stability and the return payable by the companies there Have been selection of 20 industries which are listed in ASX 200 index. However, the analysis will be based on passive and active index analysis which will be measured and compared as per making clear observation on the operation

QUESTION 1

Designing a Passive Strategy to ascertain the risk-free rate of ASX 200

Abacus Property Group Stapled Securities

Analysis of Sharpe ratio

 Less than 1 Not good Between 1 to 1.99 Ok Between 2 to 2.99 Good More than 3 Exceptional

Interpretation: The above graph is reflecting Sharpe ratio of Abacus Property with huge fluctuation in one year but in remaining it is depicted as stable which can be interpreted that it is giving average return (Park, Chae and Cho, 2017).

 Date Sharpe Ratio 31-12-06 0 31-01-07 1.487610634 28-02-07 0.998851873 31-03-07 2.561909086 30-04-07 2.837574896 31-05-07 0.925918018 30-06-07 -1.912130482 31-07-07 1.850402482 31-08-07 29.34707508 30-09-07 -1.049184845 31-10-07 0.355352083 30-11-07 -0.204938283 31-12-07 0.742597729 31-01-08 0.873565025 29-02-08 -0.022193353 31-03-08 0.038733786 30-04-08 1.902777049 31-05-08 0.813080216 30-06-08 -1.211933293 31-07-08 0.120844035 31-08-08 -0.963229899 30-09-08 -165.9149462 31-10-08 -12.0964096 30-11-08 1.311182621 31-12-08 -2.156881804 31-01-09 0.789944457 28-02-09 10.06693783 31-03-09 4.551713587 30-04-09 1.628480678 31-05-09 -0.845601478 30-06-09 1.200805407 31-07-09 6.126101949 31-08-09 -0.352836908 30-09-09 0.917428472 31-10-09 -1.294689988 30-11-09 2.983234435 31-12-09 -2.598449218 31-01-10 -1.114378695 28-02-10 4.884986333 31-03-10 1.293467063 30-04-10 0.164007824 31-05-10 0.379799126 30-06-10 2.088872834 31-07-10 1.036697936 31-08-10 5.066418877 30-09-10 5.237344597 31-10-10 -1.595924557 30-11-10 3.076059114 31-12-10 1.63996991 31-01-11 -0.928563688 28-02-11 -1.321231265 31-03-11 -1.756418335 30-04-11 0.656805069 31-05-11 0.135368163 30-06-11 -2.190544613 31-07-11 1.090815411 31-08-11 0.493455195 30-09-11 0.367660658 31-10-11 0.786225703 30-11-11 0.61756767 31-12-11 -0.442340231 31-01-12 0.359581734 29-02-12 -0.834195312 31-03-12 2.270255818 30-04-12 0.474501634 31-05-12 1.50159983 30-06-12 0.688494152 31-07-12 -1.312619985 31-08-12 2.391042033 30-09-12 5.44446981 31-10-12 0.985065417 30-11-12 -0.869141471 31-12-12 4.259274568 31-01-13 3.722964343 28-02-13 -0.390092725 31-03-13 -0.809575462 30-04-13 0.528158937 31-05-13 0.552973716 30-06-13 -0.746093761 31-07-13 0.60320371 31-08-13 1.66227561 30-09-13 0.14900488 31-10-13 0.233532361 30-11-13 -1.219083243 31-12-13 0.94107747 31-01-14 3.953993863 28-02-14 -1.569994758 31-03-14 -1.001502817 30-04-14 -1.407927411 31-05-14 0.991677513 30-06-14 0.883941544 31-07-14 -1.477959722 31-08-14 -2.283926338 30-09-14 1.976216536 31-10-14 0.85722464 30-11-14 8.059011104 31-12-14 -0.675533957 31-01-15 2.583897322 28-02-15 1.288890048 31-03-15 0.959431839 30-04-15 1.319996364 31-05-15 -0.688783515 30-06-15 8.001721257 31-07-15 0.446529586 31-08-15 0.00510699 30-09-15 -0.834077191 31-10-15 1.104958144 30-11-15 2.212361719 31-12-15 0.678873793 31-01-16 1.048640876 29-02-16 -0.41401906 31-03-16 0.499247202 30-04-16 2.087980027 31-05-16 0.311620065 30-06-16 -0.039485949 31-07-16 -1.918549257 31-08-16 1.428148169 30-09-16 0.176383486 31-10-16 -1.047994232 30-11-16 1.214783041

Interpretation: The above graph is depicting Sharpe ratio of Adelaide Brighton which has various fluctuations as it is indicating that it is giving extraordinary returns in between but due to many new entrants in its industry it started giving average return but in stable position (Clark, 2016).

ALS Limited:

Interpretation: ALS Limited is not up to the mark as its Sharpe ratio is not giving perfect return as compared to its industry and it considers huge fluctuations (Walden, 2015).

Ansell Limited:

Interpretation: The above graph of Ansell Limited is depicting the worst return as it seems it is giving return on basis of seasonal aspect but when it is giving negative return in high aspect which cannot be hedged (Cremers and et.al., 2016).

Vocus Group Limited:

Interpretation: Vocus group limited is giving Sharpe ratio with various fluctuations as once in while it is depicting negative return but that can be ignored while observing profit margin.

TPD Telecom Limited

Interpretation: The telecom industry is emerging in whole world especially in UK as it is depicting huge fluctuations but it is able to achieve huge return or specific return (Kahn and Lemmon, 2016).

Harvey Norman Holdings Limited

Interpretation: The above graph is depicting huge fluctuations in past year but in present era, it is giving more than average return, it will be coming in category of exception.

Evolution Mining Limited:

Interpretation: Evolution mining Limited is reflecting major fluctuations but on its contrary it is giving loss also but it is depicting more than average return which is good for organization (van Duuren, Plantinga and Scholtens, 2016).

Tabcorp Holdings Limited

Interpretation: Considering the operational efficiency of the organization on which Sharpe Ratio has bring the most appropriate as there are positive outcomes have been seen in the analysis (Klingebiel and Rammer, 2014). It will be recommended to the organization that they must have effective operating control which will let it remain on positive extent.

TPG Telecom Limited:

Interpretation: Ascertaining the information listed in the above graph on which it can be said that there is a huge fluctuation in the outcomes which insist that in the current times the ratio have reflected most favorable outcomes which will be fruitful for the industry (Cao, 2018).

Seven Group Holdings:

Interpretation: Demonstrating the operational variations in the outcomes on which it can be said that there are differences in the outcomes there are various negative and positive outcomes.

Alumina Limited (AWC.AX):

Interpretation: Ascertaining the outcomes on which it can be said that there is various operation on which it can be said that there are maximum negative outcome.

Altium Limited (ALU.AX):

Interpretation: There are negative outcomes from analyzing the Sharpe ration of this organization which is not preferable on investment point of view.

Beach Energy Limited (BPT.AX):

Interpretation: there are mix outcomes from this company on which it can be said that it will be preferable and appropriate in terms of making the adequate operational practices.

Computershare Limited:

CSR limited:

Dexus Units FP Stapled:

Incitec Pivot:

Mirvac Group Stapled Securities:

Orica Limited:

Active index return:

Considering the appendix which consists of all the information of 20 ASX 200 listed stock such as Abacus Property Group Stapled Securities, Adelaide Brighton, ALS Limited, Vocus Group Limited, TPD Telecom Limited, Harvey Norman Holdings Limited, Evolution Mining Limited, Tabcorp Holdings Limited, TPG Telecom Limited, Seven Group Holdings, Alumina Limited (AWC.AX), Altium Limited (ALU.AX), Beach Energy Limited (BPT.AX), Computershare Limited, CSR limited, Dexus Units FP Stapled, Incitec Pivot, Mirvac Group Stapled Securities and Orica Limited.

QUESTION 2

Critically reflecting ways of strategy of active portfolio

The strategy of active portfolio is replicated as portfolio management strategy which includes investments which are outperforming the index of investment benchmark. While managing small active fund along with CIO active management strategy has been followed as it is exploiting inefficiencies of market by purchasing securities which are undervalued or short position for securities which are overvalued. It could be in both forms whether in combination or alone. There has been absence of volatility as compared to index of benchmark which is directly dependent on target for fund for specific hedge or for portfolio of investment. There is usage of huge number of factors which are considered for preparing portfolio.

In the same series there are various strategies for creating portfolio such as merger arbitrage, quantitative measures, asset allocation, sector investments, option writing and buying stocks according to turnover etc. The above portfolio which has been prepared which includes 20 stocks which are listed on ASX 200. The criteria which has been selected is according to turnover or mid-caps. The companies which are having market cap of 2 billion to 10 billion are termed as mid cap companies. The portfolio of mid cap stocks is riskier than compared to large cap stocks but it is considered as less risky if compared from stocks of small caps.

 Midcap Companies Abacus property Group Units Adeliade Brighton Als limited Ansell limited Vocus group Limited TPD telecom limited Harvey Norman Holdings limited Evolution mining Limited Tabcorp Holdings Limited TPG telecom limited Seven Group holdings Alumina Limited Altium Limited Beach energy Limited Computershare Limited CSR limited Dexus Units FP Stapled Incitec Pivot Mirvac Group Stapled Securities Orica Limited

The above stated companies are termed as mid cap stocks which are considered for evaluated for constructing portfolio because of the risk basis and volatility.

Critically differentiating the outcome of Active and Passive portfolio returns

Analyzing the outcomes from operation where it can be said that the active index analysis has bring the adequate determination of the operations which will be appropriate and helpful to the investors in relation with analyzing the profitability, effei9cincy of organizations. Thus, in accordance with Sharpe ratio analyzing as listed in Appendix where it can be said that there are various organization which have positive outcomes and that will be effective and helpful to the industry in relation with having the appropriate investors.

Discussing the analysis and results

As per making the most appropriate determination of the profitability of the organization where the analysis have been made on 20 ASX200 listed shares such as Abacus Property Group Stapled Securities, Adelaide Brighton, ALS Limited, Vocus Group Limited, TPD Telecom Limited, Harvey Norman Holdings Limited, Evolution Mining Limited, Tabcorp Holdings Limited, TPG Telecom Limited, Seven Group Holdings, Alumina Limited (AWC.AX), Altium Limited (ALU.AX), Beach Energy Limited (BPT.AX), Computershare Limited, CSR limited, Dexus Units FP Stapled, Incitec Pivot, Mirvac Group Stapled Securities and Orica Limited

CONCLUSION

By considering the above study on which it can be said that there are various operational practices which in turn will be useful in analyzing the efficiency of businesses. Active and Passive analysis have been made on 20 ASX 200 Lised stocks such as Abacus Property Group Stapled Securities, Adelaide Brighton, ALS Limited, Vocus Group Limited, TPD Telecom Limited, Harvey Norman Holdings Limited, Evolution Mining Limited, Tabcorp Holdings Limited, TPG Telecom Limited, Seven Group Holdings, Alumina Limited (AWC.AX), Altium Limited (ALU.AX), Beach Energy Limited (BPT.AX), Computershare Limited, CSR limited, Dexus Units FP Stapled, Incitec Pivot, Mirvac Group Stapled Securities and Orica Limited.

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