Alex Sharpe Client Letter

915 words 4 pages
E Summit Street
Kent, Ohio 44240

February 1, 2007

Ms. Alex Sharpe
Rhodes Rd
Columbus, Ohio 43201

Dear Ms. Shape:

I’m writing to give you some recommendations on your investment strategy on behalf of the College of Business Administration of Kent State University.

From the information that you provided to us, I found that you want to pursue a more active investment strategy by adding stocks to your current equity portfolio in the Vanguard 500 Index Fund. And you are interested in the Hasbro and Reynolds. So I have done some analysis on the possible combination of these stocks.

First, I did a summary statistics of the three assets base on the latest five years’ worth of monthly returns for Vanguard S&P 500 Index
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And you should notice that in my previous correlation analysis, we could see that these three assets are all positively related so we cannot diversify all the unsystematic risk. Therefore, there would be deviations if we use ß during the analysis.

From the analysis above, you can see that under certain level of risk, the combination of all the three assets would generate a higher return. And with a certain level of return the combination of the three assets could avoid more risks than the other two methods. The investment strategy in the sample does not have to be the fixed investing percentage. And the above is just my recommendation, if you want a lower risk you could increase the percentage that invested in the Vanguard and Hasbro or you could also keep certain amount of cash to reduce the risk, but meanwhile it would come with a lower return. And if you think you can accept a relatively higher risk and want a higher return, you could invest more in the Reynolds and Hasbro.

Please do not hesitate to call with any questions.


Lei C.
College of Business Administration
Kent State University

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