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Md. Zahirul Islam Rayhan.pdf
1. Submitted By:
Md. Zahirul Islam Rayhan
PGDCM, 20th BatchD20-16
Bangladesh Institute of Capital Market
Submitted To:
Dr. Md. Fardous Alam
Bangladesh Institute of Capital Market
Date of Submission: 19 August, 2022
BASIC STATISTICS (D-103) TERM PAPER
Correlation & Regression Analysis On SQUARE PHARMA with DSEX INDEX
2. 1 | P a g e Md. Zahirul Islam Rayhan
1. Introduction
This is report based on the return of Dhaka Stock Exchange Index (DSEX) and a selected stock
called Square Pharma Ltd. In the report I tried to find out return of DSEX and SQPHARMA. After
calculation of 5years monthly data of DSEX and SQPHARMA I have tried to find out different
statistical data and analysis output like Expected Return, Standard Deviation, Covariance,
Correlation and Regression of both variables.
2. Types of Research and Data Sources
This is basically a quantitative research based on different statistical analysis. The data obtain and
available from secondary sources and publicly available like DSE, investing.com, Stock Now,
Ecosoftbd.com and other online portal which is mentioned in references area.
3. Descriptive Statistics, Statistical Tools and Findings
I have taken last 5 (five) years monthly or 60 (Sixty) month Closing data or return under
consideration while preparing the report and found that the maximum and minimum index was
7329.03 and 3939.95 point. On the other hand, the maximum and minimum price of the stock
was 271.18 and 164.29 Tk (Apendix1). I have use Microsoft excel to calculate the indicator. The
below table can give a summarize information about the findings:
3. 2 | P a g e Md. Zahirul Islam Rayhan
Descriptive Statistics on CLOSE Price and Return of SQPHARMA & DSEX Index Last 5years
Monthly
Particular SQPHARMA DSEX
Mean Close Price 218.51 5563.94
Standard Error .007966 .005989
Median of Close Price/Index Point 220.79 5450.62
Mode of Close Price/Index Point 211.8 4008.28
Standard Deviation of Return 6.17% 4.64%
Variance of Return .0038 0.0022
Range of Close Price and Index 106.89 3339.95
Minimum Close Price/Index 164.29 3989.08
Maximum Close Price/Index 271.18 7329.03
Covariance of Return with Index .00211232
Correlation with Index 73.79%
Expected Return of the Stock/Index .17% 0.12%
Regression Equation y = .0176x+120.37
R2
.3757
4. 3 | P a g e Md. Zahirul Islam Rayhan
4 7
18 22
7 2
60
0
20
40
60
80
Frequency
Price
Histogram SQPHARMA
Frequency distribution of DSEX Index
I also found the frequency distribution table and the histogram which are given below:
4. Interpretation of Statistical Findings
The primary objective of the statistical analysis to find relationship of the return of the stock with
the index of Dhaka Stock Exchange. I have considered DSEX as independent variable and in the
case of stock I have considered SQPHARMA.
Class limit Frequency Percentage%
3300-4000 1 1.66%
4001-4700 8 13.33%
4701-5400 17 28.33%
5401-6100 18 30%
6101-6800 12 20%
6801-7500 4 6.66%
Total 60 100%
Class Limit Frequency Percentage %
160-180 4 6.67%
181-200 7 11.67%
201-220 18 30.00%
221-240 22 36.67%
241-260 7 11.67%
260-280 2 3.33%
Total 60 100.00%
1
8
17 18 12
4
60
0
20
40
60
80
4000 4700 5400 6100 6800 7500 Total
Frequency
Index
Histogram-DSEX
Frequency distribution of SQPHARMA
5. 4 | P a g e Md. Zahirul Islam Rayhan
Expected return and Standard Deviation
The expected return of DSEX is .12% and the standard deviation of the return is 4.64% which
indicate the dispersion from the mean and the stock I selected the expected return is .17% and
the standard deviation is 6.17% which indicate that the return of the stock deviate 6.17% from
the mean return. We can see that the deviation of the stock and index are almost same from
their mean return.
Variance
Another calculation is variance which tell us the spared of the return high variance indicate high
divergence of the variables and low variance indicates the convergence of the variables. Here we
can see the variance of the return of the stock is 0.0038 and the index is 0.0022 which indicate
the high divergence.
Covariance
We can see the covariance of the variable which is positive and it tell us that the return of index
and the stock very together. So, we can say as the value is positive so they vary together with a
point of 0.00211232
Correlation
Correlation with index is also positive which is 73.79%. we can say the SQPHARMA return is
positively correlate at 73.79%.
As P- value is less than 5% we can reject null hypothesis and it doesn’t mean the alternative is true there
may be other variable that may cause the variation of the return of the stock.
6. 5 | P a g e Md. Zahirul Islam Rayhan
Regression and data summary
The regression equation of data is y = .0176x+120.37
Here the equation describes how the stock return changes which is in Y axis and represents the
dependent variable with changes in index return which is in X axis. As the trend line is upward,
we can say if index return increases the stock return also tends to increase. For every percentage
of changes in index return there is 0.0176% increase in return of stock. If index don’t move in a
month or year, the stock price will increase by 120.37%. The value of R2 tells us that .3757% of
the variation of the return of SQPHARMA can be explain by this model.
y = 0.0176x + 120.37
R² = 0.3757
150
170
190
210
230
250
270
290
3,500.00 4,000.00 4,500.00 5,000.00 5,500.00 6,000.00 6,500.00 7,000.00 7,500.00 8,000.00
SQPHARMA
DSEX
Regression Chart
Series1 Linear (Series1)
7. 6 | P a g e Md. Zahirul Islam Rayhan
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.612903
R Square 0.375651
Adjusted R
Square 0.364886
Standard
Error 18.89957
Observations 60
ANOVA
df SS MS F
Significance
F
Regression 1 12464.87 12464.87 34.89669 1.94E-07
Residual 58 20717.23 357.1936
Total 59 33182.1
Coefficients
Standard
Error t Stat P-value Lower 95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept 120.3729 16.79143 7.168711 1.53E-09 86.76121 153.9846 86.76121 153.9846
DSEX Index 0.017639 0.002986 5.907342 1.94E-07 0.011662 0.023615 0.011662 0.023615
8. 7 | P a g e Md. Zahirul Islam Rayhan
5. Conclusion
The relationship of return of index and the stock is positive and the variance also positive but
there may have other variable that may cause the variation of the stock other than the index as
we can see there is some point in regression line is far away from the line.
6. References
https://corporatefinanceinstitute.com/resources/knowledge/other/r-squared/
https://www.greenbook.org/marketing-research/how-to-interpret-standard-deviation-and-standard-
error-in-survey-research-03377
https://www.investopedia.com/terms/p/p-value.asp
https://www.investing.com/
.
