'Comparison Between Gold Rates and Sensex Essay\r'

' coefficient of correlation : Correlation is a statistical technique that can show whether and how strongly pairs of variables are related. Correlation is computed into what is known as the coefficient of correlation coefficient coefficient coefficient, which ranges amid -1 and +1. Perfect confirmative correlation (a correlation co-efficient of +1) implies that as genius security moves, all up or down, the other security will move in lockstep, in the same direction. Alternatively, perfect negative correlation means that if one security moves in either direction the security that is perfectly negatively fit will move in the opposite direction. If the correlation is 0, the movements of the securities are said to have no correlation; they are completely random.\r\nRegression analysis: It involves identifying the family between a dependent variable and one or more independent variables.\r\nCase abstract\r\nThe initial analysis compares two addition superpower prices the SENSE X and the GOLD. The Sensex has the top 30 gestates. The funds is an important Asset in terms on Investment as it also offers the benefit on diversifying the Portfolio risk.\r\nTo apply the Correlation and regression concept, we consider an investor who plans to invest in bullion looking at the encouragement in the favourable prices. He is still reluctant if he should pack princely as an enthronement survival or if he should consider investing in many other investment options based on Sensex. as on 15th September 2012.\r\nHence, he plans to broaden out a research on the same, for which he attends a seminar on â€Å"Investment Opportunities”. There was a debate amongst the Financial Analysts †â€Å"Does Sensex judge affect Gold prices?”\r\nAnalyst1 : Gold prices have been on an uptick since 2000, while the stock market declined from 2000 to 2003 and then again in 2008. Hence, Sensex variation does not determine the Gold prices i.e. rise in Sensex might not always lead to rise in gold price.\r\nAnalyst 2: through and through the recovery phase that commenced in 2003, gold prices unploughed rising.\r\nAnalyst 1: Gold prices normally appreciates in value.\r\nAnalyst2: Fluctuations in Gold prices are determined by the fluctuations in Sensex i.e.: Decline In sensex.\r\nThis created a confusion. Hence, to finish off the confusion he plans to study the price trends of the Gold rates and the Sensex for the dates ranging from June 1st’2012 †August 31st2012.\r\nAfter checking the correlation he found that the correlation between the shutting prices on Gold and Sensex was 0.24 which was weak. Thus, he decided that Sensex rates was not the only factor to consider investment in Gold. Otherwise, Gold is a good option for investment as it provides diversification and hedging in investment.\r\nConclusion:\r\nCorrelation between Gold and Sensex is 0.24 which is positive and weak. Thus, based on this correlation change in Sensex has an effect on Gold rate merely it is very small.\r\n'