Funds Management and Portfolio Selection Assignment

Funds Management and Portfolio Selection - Assignment Example FMG has regression level of 2.1, which implies that an increase in the market returns by one percent will result to an increase in its overall returns by 2.1%. A positive regression between market and assets, according correlation and data theory, results to assets’ returns moving away those of the market. Consequently, higher regression levels imply greater impacts from the market. The performance of FMG can be associated to its huge weight in all ordinary market, since it is a company associated with mining, processing, as well as transportation of iron ore within the region of Pilbara, Western Australia. Being an iron ore exporting company all over the world, an improvement in the global economy is likely to result increases in the level of consumption, which will affect positively on the prices of FMG and index (Brailsford, Heaney & Chris, 2011). In addition, this effect is also likely to affect AXA in a similar manner, since it is also one of the companies with notable regression. AXA is the top most wealth management company in Australia and New Zealand with capital management as its integral objective. Its steady improvement is the overall performance in the Australian stock market can be closely associated with the company’s strong capital position. Comparing to other industries, mining industry is the biggest market in Australian, and it takes a huge shape in stock market. This is a reason behind FMG’s higher regress than other companies. Next, these companies set up to ten difference portfolios and the beta decrease with the portfolio extending (Sutton, 2009). When extra stock is added in each portfolio, the level of Beta reduces from 0.5 to 0.1. As a general measure of stock’s systematic risk, Beta is defined as the quantity of systematic risk present in a certain asset respective of the risky asset. A beta level below 1.0 show a stock with lower amount of systematic risk compared to the market, the reverse is true. The results