SRUJAN REDDY REDDYARYAVEER SINGH GLENN SOLOMON

VISHAL SHELKEKARTHEEK REDDY DHARAM

ALI BARAN GUVENAL

Finance Portfolio Optimization

You should invest in one type of instrument if you are this guy in the year 2007. Which is not the case, so the need for Portfolio Optimization

“Don’t put all your eggs in one basket.”We all agree that holding two stocks is less risky as compared to one stock. But building the Optimal Portfolio is very difficult. Markowitz provides an answer to it with the help of Risk and Expected return relationship.

Markowitz Model

We all agree that holding two stocks is less risky as compared to one. But building an optimal finance portfolio is very difficult. Markowitz provides an answer to it with the help of risk and return relationship.

In developing the model, Markowitz has given up the Single stock portfolio and introduced Diversification. And in today’s ever changing scenario we cannot be certain about anything in the Finance world and hence Diversification provides a safer play ground for investors.

Finance Optimization Model Overview

Increase Expected Return

Considering the Following

1. Controlled Risk

2. Diversified Investment

3. Maximum Utilization of funds

4. Bonds greater than 10% & ETF less than 5%

Goals of a Portfolio Optimization Model (Markowitz)

Stocks (Moderately Risk varies from one stock to the other)

Bonds (Stable)

ETF( Exchange Traded Fund) (Highly Volatile & Risky )

Diversification

Efficient Frontier Set of best portfolios that offers the maximum possible Return for a given level of Risk

Instrument I – Stocks Initial Pool of 480 stocks , S&P 500 Source :- Yahoo Finance

Instrument II –ETFS Stocks Initial Pool 33 states DataSource :- Yahoo Finance

Instrument III – Bonds Initial Pool of 10 Source: - Yahoo Finance

Instrument Data Collection

Decision Support System

Graphical Representation of Investment & Portfolio Health

Portfolio Scaled to Large Number of Assets

Solver Gurobi

Data Collection R Statistical Programming Yahoo Finance (Source)

Modelling Python

Front End JavaScript & HTML

Code Link :- https://github.com/rssrujan/porfolio-optimization

Technologies Used

Thank You