Standard deviation in portfolio management: A look at Dubai Financial Markets Stocks. It is advisable to measure standard deviation of the stock portfolios returns rather than the range because the former gives a clear volatility measure. It is better to understand the pros and cons of risk in order to understand the importance of carrying out standard deviation on stock portfolios.
It is common for people to try to avoid risk in all directions. This is because many people view risk from a negative perspective and prefer to avoid it through all means. However, this is not the game in the investment world. This is because risk is an attached factor that relates to performance directly. It can be either desirable or undesirable but again this is necessary for there to be any progress in the investment world (Blackburn par 9). In financial markets, risk can be either good or bad. It necessarily depends on doing the correct analysis and knowing when to invest (Dorfman 217). The important thing is to understand risk and its effect on stocks. This assists individuals in understanding and applying some financial tool such as standard deviation. In this case, standard deviation defines the probability of the spread in a series of data. Therefore, it becomes necessary and part of decision making when dealing with stocks.
The essential stocks to be analyzed from Dubai Financial markets include stocks for Dubai Financial Market and stock for Emirates NBD Bank. These stocks are the best performing stocks on the Dubai Financial Market. The selection process involved going through the latest news articles and finding out the best performing securities in the market. Given that my company is a bank, I had to choose data that relates to the banking industry. I compared the performance and volatility of both institutions in the banking industry and the investment and financial institutions. The last criteria for choosing the stock are based on the companies’ data, which is widespread and diverse.