Data series analysis using R Case Study Solution


The report contains an analysis of two stocks i.e. Jhonson and Jhonson and Eli Lilly using various techniques including normal and logarithmic returns, descriptive statistics, moving averages, ADF Test and ARIMA Model taking weekly prices of the two securities for five years from August 1, 2015 to July 31, 2020 from Yahoo Finance. The report also provide a conclusion about which stock will perform better in next hundred days on the basis of the analysis conducted. Moreover, the report contains charts for moving averages that are constructed using excel along with an analysis in R studio as well. Other plots and results are generated using R studio functions.

Normal and Logarithmic Returns

Normal Returns vs Logarithmic Returns are an important factor when looking at your investment portfolio. Many investors who want to maximize their returns have found that a mixture of normal and log returns is most profitable. While there are many advantages to this type of return, there are some risks as well.

A common misconception about normal returns is that they only apply to certain types of stocks. In actuality, normal returns apply to any type of stock including those that have had a few years of steady growth. There is no age limit to the category of stocks used in this analysis. If you want to find out the profitability of any stock you can use normal returns instead.

Log returns, on the other hand, relate directly to how long it will take for one dollar’s worth of stocks to grow to a hundred dollars. The longer the time frame you are looking at, the lower the risk. There is no minimum amount of time you have to invest in order to reach the maximum profit.

In general, there is no real difference between normal and log returns when it comes to determining the profitability of your investments. Both of these methods of calculating returns will give you the same amount of profit. It all depends on your specific risk tolerance, financial history and the type of stock you are evaluating.

The Normal and Logarithmic returns for JNJ and LLY are given below………………………….


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