To understand normal distribution and its application, Let us use daily returns of stocks traded in BSE (Bombay Stock Exchange). Imagine a scenario where an investor wants to understand the risks and returns associated with various stocks before investing in them. For this analysis, we will evaluate two stocks: BEML and GLAXO. The daily trading data (open and close price) for each stock is taken for the period starting from 2010 to 2016 from BSE site (www.bseindia.com)
what we find in this
1.Visualize the Daily Closing Price Trends
2.Visualization of Distribution of Daily Gain Values
3.expected Gain (Average or Mean Value of Dailyate Window Gain)
4.Volatility in Daily Gain (Standard Deviation or Variance)
5.What is the expected daily rate of return of these stocks?
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Which stocks have higher risk or volatility as far as daily returns are concerned?
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Which stock has higher probability of making a daily return of 2% or more?
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Which stock has higher probability of making a loss (risk) of 2% or more?