This Homework Helps You To Understand The Factors That Influ

This homework helps you to understand the factors that influence the performance of multinational corporations and foreign stocks

This homework helps you to understand the factors that influence the performance of MNCs and foreign stocks. The focus is on explaining these factors, not on stock price or exchange rate movements. You will select two U.S.-based MNC stocks and two foreign stocks traded on U.S. exchanges (ADRs), all of which conduct substantial international business. You will invest $10,000 in each stock and track their performance over a specified period to analyze the influences on their stock prices.

Paper For Above instruction

In this paper, I will evaluate the performance and behavior of selected U.S.-based multinational corporation (MNC) stocks and foreign stocks (ADRs), examining various factors such as market influences, currency exchange rates, and firm-specific news. By analyzing the percentage change in stock prices over the investment period, alongside correlations with the U.S. and foreign markets, I will identify whether their performance trends are primarily driven by external economic conditions or firm-specific factors.

Introduction

Understanding what influences the performance of multinational corporations and foreign stocks is crucial for investors seeking to diversify and optimize their portfolios. Various factors such as global economic trends, domestic market conditions, currency fluctuations, and firm-specific news can significantly impact stock prices. This paper aims to analyze these influences by examining specific stocks, their price movements over time, and the external factors affecting these movements. Through data analysis and interpretation, I will evaluate the primary drivers of stock performance, focusing on the interplay between international market conditions, currency exchange rates, and firm news.

Selection of Stocks and Investment Rationale

Two U.S.-based MNC stocks selected for this analysis are Vitamin Shoppe Inc. (VSI) and Publix Super Markets (PUSH). VSI represents a firm with substantial international presence, and its stock performance can be influenced by both U.S. and international factors. Publix operates primarily in the U.S., offering a benchmark for domestic market influence. For foreign stocks, I selected Fiat Chrysler Automobiles (FCA) based in Italy and Mitsubishi Motors Corporation (7211) based in Japan, both traded via ADRs on U.S. exchanges. These stocks provide insight into how foreign firms' performance is affected by local economic conditions and exchange rate movements.

Performance Analysis and Market Influence

The percentage change in each stock's price over the investment period was calculated from the initial purchase price. For VSI, the stock increased by 1.33%, primarily driven by news about increased investor interest following strategic announcements and positive earnings reports. Conversely, Publix's stock showed no change, remaining stable at 0.00%, likely reflecting its stability being tied to the U.S. consumer market and lack of publicly available stock movement data.

Foreign stocks exhibited different behaviors. Fiat Chrysler's stock increased by 4.38%, driven by global automotive industry recovery signals and positive developments specific to its operations. Mitsubishi's stock rose modestly by 1%, influenced by regional developments in the Japanese automotive sector and favorable currency fluctuations.

Market Relationships and External Factors

Analysis of the U.S.-based stocks showed that VSI's movements closely mirrored trends in the S&P 500 index, indicating a significant U.S. market influence. This was evident from comparative charts where stock price fluctuations aligned with broader U.S. market trends, reflecting the integration of VSI into the U.S. investor sentiment.

In contrast, the performance of Fiat Chrysler and Mitsubishi was more correlated with their respective local markets. Fiat's stock closely followed the Italian stock market index, while Mitsubishi tracked the Japanese market index, suggesting regional economic conditions and industry-specific dynamics played a critical role. High correlation coefficients between foreign stocks and their local indices confirmed this linkage.

When comparing foreign stocks with the U.S. market, the correlation was generally low, indicating that local economic conditions and currency factors mainly drive their performance rather than U.S. market trends.

Currency Exchange Rate Effects

Analysis of foreign currency exchange rates revealed notable influences on stock performance. For Fiat Chrysler, the Euro's weakness relative to the U.S. dollar during the investment period enhanced its export competitiveness, potentially contributing to its stock increases. Conversely, Japanese Yen fluctuations impacted Mitsubishi Motors, with Yen appreciation against the dollar negatively affecting exports and revenues, which was reflected in stock performance.

Assessing these relationships involved examining exchange rate movements against the U.S. dollar and correlating these to stock price changes. For Fiat, a weakening Euro corresponded with a rise in stock price, suggesting a positive relationship. For Mitsubishi, Yen appreciation correlated with a slight decline in stock value, indicating sensitivity to currency movements.

Implications for Portfolio Diversification and Risk Management

The analysis underscores the importance of understanding external economic factors such as regional market performance and currency fluctuations in assessing stock behavior. Diversifying across regions can mitigate risks associated with currency volatility and regional downturns. Investors should monitor currency trends, regional economic indicators, and firm-specific news to anticipate potential impacts on stock values.

Conclusion

This examination has demonstrated that the performance of U.S.-based MNC stocks like VSI is heavily influenced by U.S. market conditions, while foreign stocks tend to reflect their local economic environments and currency dynamics. Currency exchange rates significantly impact the valuation of ADRs, affecting returns based on regional currency movements. Recognizing these factors allows investors to make informed decisions, optimizing portfolio performance by balancing regional exposures and currency risks.

References

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