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Calculating Risk and Return of Investments in a Portfolio (Part A)
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Abstract
Dilip Shangvi (Shangvi), founder of Indian pharmaceutical giant Sun Pharmaceutical Industries Ltd. (Sun Pharma), had invested his personal wealth in several companies. Some of his major investments were Rs 250 million in Natco Pharma Limited (Natco Pharma), and Rs 18 billion in Pune-based Suzlon Energy Ltd. (Suzlon). Shangvi held a 60.8 % stake in Sun Pharma and received more than Rs 12 billion as dividend from his shares between 2010 and 2015. The case discusses his investments using a risk return framework.... |
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Issues
The case is structured to achieve the following teaching objectives:
- Learn about the concept of the Marginal Investor.
- Understand the Risks for a Marginal Investor.
- Calculate the historical returns of the companies in which Shangvi invested.
- Calculate Variance and Standard Deviation of the three companies and find out the riskier investment for Shangvi.
- Understand the benefit of diversification in a portfolio.
- Understand Diversifiable and Non diversifiable risk and discuss how diversification reduces firm specific or unsystematic risk.
- Calculate Covariance and Correlation and interpret the meaning in relation of the portfolio of Shangvi.
- Calculate minimum variance for the portfolio.
| Contents |
| INTRODUCTION |
| DILIP SHANGVI: THE SELF-MADE BILLIONAIRE |
Keywords
Dilip Shangvi, Risk and Return, Portfolio, Minimum Variance Portfolio, Diversification, Unsystematic Risk, Suzlon, Natco Pharma, Sun Pharma
