a) Estimate beta and 𝑅2 for each individual company, using Excel functions SLOPE and
RSQ. Comment on these values. Why is the evaluation of stock returns important for investors?
[15%]
b) Explain what a correlation coefficient is and why it is important. What is the difference between beta and correlation coefficients? Using the Excel function CORREL, calculate the correlation coefficient between the monthly returns of the stocks.
Comment on these values.
[15%]
c) Using average returns for these stocks, construct an equally weighted portfolio and find its return. Then calculate the portfolio beta and 𝑅2
