Browse By

Portfolio Optimization

This is the process of changing the mix and/or choice of investments in a portfolio so as to produce the maximum expected return for a given level of risk.

Underlying portfolio optimization is the concept of diversification where specific risk of a portfolio may be reduced and removed all together by holding investments that have low or negative correlation.

However, unlike volatility, correlation is the enemy here because in times of stress, historically observed correlations tend to breakdown (previously uncorrelated investments become highly correlated) and eliminate any advantages of diversification.

Take a look at the Advance Risk management course to get comfortable with an Excel Solver based spreadsheet for optimizing portfolio allocation using historical data and investment policy goals.

 

Free Courses

View More >>

Recent Posts

  1. The difference between value and growth investing.
  2. Impact of taxes and fees on retirement savings and spending
  3. The case for Optimal portfolio alpha.
  4. Portfolio alpha stability and allocation optimization models.
  5. Value investing lessons from the Big Short (film) – Part II
  6. The Big Short case study. For value investors, portfolio managers and fixed income traders.
  7. Higher moment Portfolio models. Skewness preference.
  8. Portfolio Management Alpha dominant strategies. 2012 – 2016 a short case study.
  9. Portfolio Management Training – Dubai, Bangkok – March 2017
  10. Calculating annual return holding period return or aggregate return?

View More >>