## Comment on Live Example -1

Hello Karthik,

Thank you for interesting series. I have 2 questions:

1: Given that X and Y are stock prices – shouldnt the beta neutrality be applied on nominal exposure so if tata motor (Y) – Tata Motor DVR (X) has a BETA of 1.59 shouldnt it mean that exposure on tata motor should be equal to 1.59 times the exposure on Tata Motor DVR? so if nominal value of one lot of tata motor is (1500*331.65) Rs 497,475 the exposure i need to take in DVR is 1.59*497,475 = 790,985 which translates into 4064 shares of DVR @ 194.65. please clarify?

2: In computing the Z score shouldnt we see how far is the current datapoint from mean rather than absolute value. so Z score should be (current value of residual – mean of last 200 onservations)/ standard deviation of 200 observations of residual. Please clarify?

Many thanks,

Vipin