CI Market Dashboard

We have put together a collection of market indicators and track them to help you gauge the direction of the market.

CI Analysis Worksheets

Interactive analysis templates covering DuPont analysis (return on equity), valuing stocks the Warren Buffett way, and more to come.

CI Blog Feed

Market Rebound Generates New Bullish Dashboard Signal
posted 18 hours ago by Wayne Thorp

Bullish Sentiment Lowest in a Year
posted 4 days ago by Wayne Thorp

Mt. Gox Likely to Begin Liquidation Process
posted 5 days ago by Wayne Thorp

Intel’s Profit Declines Again Yet Shares Rise–What’s In Store for PCs?
posted 5 days ago by Joe Lan

Today Only: Google Glass for Sale
posted 6 days ago by Wayne Thorp

Computerized Investing > Fourth Quarter 2011

Mean Variance Optimization: Multi-Asset Portfolio

PRINT | | | | COMMENTS (25) | A A   Reset

by Wayne A. Thorp, CFA

In the Third Quarter 2011 issue of Computerized Investing, I began a discussion of how investors can use a spreadsheet program to maximize the risk-return makeup of a two-stock portfolio. This oversimplified example allowed us to walk through several functions of Excel to calculate the correlation and covariance between investments—the degree to which returns move in the same direction (or not)—and the standard deviation, or volatility, of individual assets and the portfolio as a whole. The article culminated in using the Solver module in Excel to arrive at the weights invested in each stock in order to minimize the overall portfolio risk (minimize the standard deviation).

Obviously, few investors hold only two stocks or securities. For this article, I will expand on the previous article’s concepts to show you how you can use Excel to construct a multi-asset investment portfolio that achieves the goal of either minimizing risk or maximizing return.

...To continue reading this article you must be a Computerized Investing Subscriber.

Gain exclusive access to this article and all of the benefits and investment education a Computerized Investing subscription offers.

SUBSCRIBE TODAY for just $24.
Log in
Already a CI subscriber? Login to read the rest of this article.

A subscription to Computerized Investing includes a monthly email and access to the CI Website, all of which aim to benefit your investing skills with respect to computers and the Internet.