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# Develop a regression model to predict the price of two stocks

The closing stock price for each of two stocks was recorded over a 12-month period. The closing price for the Dow Jones Industrial Average (DJIA) was also recorded over this same time period. These values are shown in the following table:

DJIA Stock 1 Stock 2
11,168 48.5 32.4
11,150 48.2 31.7
11,186 44.5 31.9
11,381 44.7 36.6
11,679 49.3 36.7
12,081 49.3 38.7
12,222 46.1 39.5
12,463 46.2 41.2
12,622 47.7 43.3
12,269 48.3 39.4
12,354 47.0 40.1
13,063 47.9 42.1
13,326 47.8 45.2

(a) Develop a regression model to predict the price of stock 1 based on the Dow Jones Industrial Average.

(b) Develop a regression model to predict the price of stock 2 based on the Dow Jones Industrial Average.

(c) Which of the two stocks is most highly correlated to the Dow Jones Industrial Average over this time period?

#### Solution Preview

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The closing stock price for each of two stocks was recorded over a 12-month period. The closing price for the Dow Jones Industrial Average (DJIA) was also recorded over this same time period. These values are shown in the following table:

DJIA Stock 1 Stock 2
11,168 48.5 32.4
11,150 48.2 31.7
11,186 44.5 31.9
11,381 44.7 36.6
11,679 49.3 36.7
12,081 49.3 38.7
12,222 46.1 39.5
12,463 46.2 41.2
12,622 47.7 43.3
12,269 48.3 ...

#### Solution Summary

The expert develops a regression model to predict the price of two stocks.

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