Calculating and Analyzing Portfolio Beta

Calculating and Analyzing Portfolio Beta
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Calculating and Analyzing Portfolio Beta
In order to calculate the beta coefficient for my investment portfolio the following information was used.
Investment vehicleNumber of SharesShare PriceShares10022.61Bonds10014.9Mutual Fund9922.01Options10015.49Certificate of Deposit12521.01
The number quantity of investments was multiplied by the price in order to obtain the value for each investment as shown below.
Investment vehicleQuantityPriceValueShares10022.61100*22.61=2261Bonds10014.9100*14.9=1490Mutual Fund9922.0199*22.01=2178.99Options10015.49100*15.49=1549Certificate of Deposit12521.011*2521.01=2521.01
The value of the entire portfolio was then obtained by the values of all investment vehicles as shown below.
Portfolio value = $ 2261 + $ 1490 + $ 2178.99 + $ 1549 + $ 2521.01
Portfolio value = $ 10,000. Thus, the value for the entire portfolio was found to be $ 10,000.
The fraction of each investment vehicle was also obtained by dividing the value for each investment vehicle by the value of the entire portfolio. Simply put:
The fraction for shares was obtained by dividing 2,261 by 10,000, which gives 0.2261. It is notable that 1490 was also divided by 10,000 to obtain 0.149. The fraction from investing in mutual funds was obtained as 0.217899 after dividing 2178.99 by 10,000. 1549 was also divided by 10,000 to obtain 0.1549 while 2521.01 was divided by 10,000 to obtain 0.252101. The results are tabulated as shown below.
Investment vehicleFraction of InvestmentShares0.2261Bonds0.149Mutual Fund0.217899Options0.1549Certificate of Deposit0.252101
The beta coefficients for all the investment vehicles were also obtained from yahoo finance and tabulated as shown below. The fraction of investment was then multiplied by the beta coefficient and summed up in order to obtain the beta coefficient for the entire portfolio.
Investment vehicleFraction of InvestmentBeta CoefficientShares0.22611.17Bonds0.1490.7Mutual Fund0.217899-2.67Options0.15491.21Certificate of Deposit0.2521011.08
Beta coefficient = 0.2261 * 1.17 + 0.149 * 0.7 + 0.218 * -2.67 + 0.155 * 1.21 + 0.252 * 1.08
Beta coefficient = 0.265 + 0.104 – 0.582 + 0.187 + 0.272 + 0.247
Beta Coefficient = 0.24674475
(Finch, Fraser, and Scheff, 2011).
The Beta coefficient for the portfolio is 0.25 implying the investment is less volatile than the market. It follows that the investment portfolio is not risky because a risky portfolio should be volatile. This implies that the possibility of receiving high returns from the investment portfolio is low (i...