Portfolio 1 - Single Efficient Frontier: Report Parameters

Portfolio Visualizer Efficient Frontier
Portfolio 1 – Single Efficient Frontier
Report Parameters
Start Date 01/01/2012

End Date 12/31/2019
Resampled Inputs No
12/28/2020 www.portfoliovisualizer.com 1 of 20
Efficient Frontier Assets
# Asset CAGR Expected Return Standard Deviation Sharpe Ratio Min. Weight Max. Weight
1 Autodesk, Inc. (ADSK) 25.23 % 31.69 % 32.50 % 0.955 0.00 % 100.00 %
2 Alphabet Inc. (GOOGL) 19.44% 21.79% 20.32% 1.039 0.00% 100.00
%
3 American Express Company (AXP) 14.53% 16.55% 18.55% 0.856 0.00% 100.00
%
4 Apple Inc. (AAPL) 24.66% 29.00% 26.54% 1.067 0.00% 100.00
%
5 Coca-Cola Company (KO) 9.24% 10.20% 13.24% 0.719 0.00% 100.00
%
6 FedEx Corporation (FDX) 8.60% 11.68% 23.29% 0.473 0.00% 100.00
%
7 Intel Corporation (INTC) 15.42% 17.92% 21.05% 0.819 0.00% 100.00
%
8 Microsoft Corporation (MSFT) 28.35% 30.85% 20.22% 1.492 0.00% 100.00
%
9 Nike, Inc. (NKE) 21.14% 23.63% 20.40% 1.125 0.00% 100.00
%
10 Verizon Communications Inc. (VZ) 10.36% 11.82% 16.42% 0.679 0.00% 100.00
%
11 PPG Industries, Inc. (PPG) 17.52% 19.50% 18.69% 1.008 0.00% 100.00
%
12 Pfizer, Inc. (PFE) 11.63% 12.88% 15.16% 0.805 0.00% 100.00
%
13 Electronic Arts Inc. (EA) 22.94% 29.29% 32.76% 0.873 0.00% 100.00
%
14 Caterpillar, Inc. (CAT) 9.40% 12.87% 25.16% 0.485 0.00% 100.00
%
15 AutoZone, Inc. (AZO) 17.63% 19.51% 18.05% 1.043 0.00% 100.00
%
16 Air Products and Chemicals, Inc. (APD) 17.61% 19.22% 16.95% 1.094 0.00% 100.00
%
17 Best Buy Co., Inc. (BBY) 21.70% 30.80% 38.20% 0.789 0.00% 100.00
%
18 CVS Health Corporation (CVS) 10.02% 12.68% 21.96% 0.547 0.00% 100.00
%
19 Amazon.com, Inc. (AMZN) 34.45% 39.40% 27.76% 1.395 0.00% 100.00
%
20 J P Morgan Chase & Co (JPM) 22.88% 25.96% 22.44% 1.127 0.00% 100.00 %
Tangency Portfolio
Ticker Name Allocation

AAPL Apple Inc. 6.51 %
MSFT Microsoft Corporation 18.91 %
NKE Nike, Inc. 13.42 %
VZ Verizon Communications Inc. 12.03 %
EA Electronic Arts Inc. 11.18 %
AZO AutoZone, Inc. 17.55 %
APD Air Products and Chemicals, Inc. 0.39 %
BBY Best Buy Co., Inc. 0.98 %
AMZN Amazon.com, Inc. 9.05 %
JPM J P Morgan Chase & Co 9.99 %
Results based on historical returns. Ex ante Sharpe Ratio calculated using 3-month treasury bill returns as the risk-free rate (0.68% annualized).
Portfolio Statistics
Portfolio Expected Return Expected Volatility Sharpe Ratio

Tangency Portfolio 25.34 % 11.96 % 2.06
Notes:
• Past performance is no guarantee of future results, which may vary. All use is subject to terms of service.
• Investing involves risk, including possible loss of principal. The value of the investments and the income derived from them may fluctuate over time.
• All portfolio returns presented are hypothetical and backtested. Hypothetical returns do not reflect trading costs, transaction fees, or taxes.
• Portfolio optimization determines target weights for portfolio assets based on mathematical models that can use either historical or forecasted data as inputs. Optimization results are not guarantees of future performance.
• The results are based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete.
• The results do not constitute investment advice or recommendation, are provided solely for informational purposes, and are not an offer to buy or sell any securities.
• The results are based on the total return of assets and assume that all received dividends and distributions are reinvested.
• Historical asset statistics are based on monthly returns from Jan 2012 to Dec 2019
• The efficient frontier is based on the monthly returns, volatilities, and correlations of the specified assets
• The displayed standard deviation and expected return in the efficient frontier are annualized from the monthly returns
• Ex-ante Sharpe Ratio for the efficient frontier data points is calculated using historical 3-month treasury bill returns as the risk free rate
Portfolio 2 – Dual Efficient Frontier
Report Parameters

End Date 12/31/2019
Resampled Inputs No
Efficient Frontier #1 Assets
%
%
4 Apple Inc. (AAPL) 24.66% 29.00% 26.54% 1.067 0.00% 100.00
%
%
%
%
%
9 Nike, Inc. (NKE) 21.14% 23.63% 20.40% 1.125 0.00% 100.00
%
%
%
12 Pfizer, Inc. (PFE) 11.63% 12.88% 15.16% 0.805 0.00% 100.00
%
%
%
15 AutoZone, Inc. (AZO) 17.63% 19.51% 18.05% 1.043 0.00% 100.00
%
%
%
%
%
Efficient Frontier #2 Assets
%
%
%
%
%
%
%
%
EF #1 Tangency Portfolio

AAPL Apple Inc. 6.51 %
NKE Nike, Inc. 13.42 %
EF #2 Asset Correlations
Name Ticker ADSK GOOGL FDX INTC MSFT VZ EA CAT AMZN JPM
Autodesk, Inc. ADSK 1.00 0.31 0.42 0.41 0.45 -0.01 0.16 0.49 0.47 0.42
Alphabet Inc. GOOGL 0.31 1.00 0.29 0.20 0.41 0.18 0.34 0.19 0.52 0.2
5
FedEx Corporation FDX 0.42 0.29 1.00 0.34 0.36 0.11 0.10 0.51 0.41 0.5
0
Intel Corporation INTC 0.41 0.20 0.34 1.00 0.54 0.18 0.05 0.44 0.26 0.3
0
Microsoft Corporation MSFT 0.45 0.41 0.36 0.54 1.00 0.22 0.08 0.45 0.40 0.4
6
Verizon Communications Inc. VZ -0.01 0.18 0.11 0.18 0.22 1.00 -0.15 0.03 0.06 -
0.0
2
Electronic Arts Inc. EA 0.16 0.34 0.10 0.05 0.08 -0.15 1.00 0.12 0.31 0.0
2
Caterpillar, Inc. CAT 0.49 0.19 0.51 0.44 0.45 0.03 0.12 1.00 0.30 0.4
EF #2 Tangency Portfolio 6
Amazon.com, Inc. AMZN 0.47 0.52 0.41 0.26 0.40 0.06 0.31 0.30 1.00 0.3
3
J P Morgan Chase & Co JPM 0.42 0.25 0.50 0.30 0.46 -0.02 0.02 0.46 0.33 1.00
Based on monthly returns from Jan 2012 to Dec 2019
Notes:
 Past performance is no guarantee of future results, which may vary. All use is subject to terms of service.
 Investing involves risk, including possible loss of principal. The value of the investments and the income derived from them may fluctuate over time.
 All portfolio returns presented are hypothetical and backtested. Hypothetical returns do not reflect trading costs, transaction fees, or taxes.
 Portfolio optimization determines target weights for portfolio assets based on mathematical models that can use either historical or forecasted data as inputs. Optimization results are not guarantees of
future performance.
 The results are based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete.
 The results do not constitute investment advice or recommendation, are provided solely for informational purposes, and are not an offer to buy or sell any securities.
 The results are based on the total return of assets and assume that all received dividends and distributions are reinvested.
 Historical asset statistics are based on monthly returns from Jan 2012 to Dec 2019
 The efficient frontier is based on the monthly returns, volatilities, and correlations of the specified assets
 The displayed standard deviation and expected return in the efficient frontier are annualized from the monthly returns
 Ex-ante Sharpe Ratio for the efficient frontier data points is calculated using historical 3-month treasury bill returns as the risk free rate
Portfolio 3- Equal weighted portfolio
Report Parameters

End Date 12/31/2019
Resampled Inputs No
Efficient Frontier Assets
%
%
4 Apple Inc. (AAPL) 24.66% 29.00% 26.54% 1.067 0.00% 100.00
%
%
%
%
%
9 Nike, Inc. (NKE) 21.14% 23.63% 20.40% 1.125 0.00% 100.00
%
%
%
12 Pfizer, Inc. (PFE) 11.63% 12.88% 15.16% 0.805 0.00% 100.00
%
%
%
15 AutoZone, Inc. (AZO) 17.63% 19.51% 18.05% 1.043 0.00% 100.00
%
%
%
%
%
Provided Portfolio
Tangency Portfolio

ADSK
AAPL Autodesk,
Apple Inc. Inc. 5.00 %
6.51
GOOGL
MSFT Alphabet Inc.
Microsoft Corporation 18.91
5.00 %
AXP
NKE American
Nike, Inc. Express Company 13.42
5.00 %
AAPL
VZ Apple Inc.
Verizon Communications Inc. 12.03
5.00 %
KO
EA Coca-Cola Arts
Electronic Company
Inc. 11.18
5.00 %
AZO
FDX AutoZone, Inc.
FedEx Corporation 17.55
5.00 %
INTC
APD IntelProducts
Air Corporation
and Chemicals, Inc. 5.00 %
0.39
MSFT
BBY Microsoft
Best Buy Co.,
Corporation
Inc. 5.00 %
0.98
NKE
AMZN Nike, Inc.
Amazon.com, Inc. 5.00 %
9.05
VZ
JPM JVerizon
P Morgan
Communications
Chase & Co Inc. 5.00 %
9.99
PPG PPG Industries, Inc. 5.00 %
PFE Pfizer, Inc. 5.00 %
CAT Caterpillar, Inc. 5.00 %
CVS CVS Health Corporation 5.00 %
Portfolio Statistics
Portfolio Expected Return Expected Volatility Sharpe Ratio

Provided Portfolio 21.11 % 12.36 % 1.65
Tangency Portfolio 25.34% 11.96% 2.06
Notes:
 Past performance is no guarantee of future results, which may vary. All use is subject to terms of service.
 Investing involves risk, including possible loss of principal. The value of the investments and the income derived from them may fluctuate over time.
 All portfolio returns presented are hypothetical and backtested. Hypothetical returns do not reflect trading costs, transaction fees, or taxes.
 Portfolio optimization determines target weights for portfolio assets based on mathematical models that can use either historical or forecasted data as inputs. Optimization results are not guarantees
of future performance
 The results are based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete.
 The results do not constitute investment advice or recommendation, are provided solely for informational purposes, and are not an offer to buy or sell any securities.
 The results are based on the total return of assets and assume that all received dividends and distributions are reinvested.
 Historical asset statistics are based on monthly returns from Jan 2012 to Dec 2019
 The efficient frontier is based on the monthly returns, volatilities, and correlations of the specified assets
 The displayed standard deviation and expected return in the efficient frontier are annualized from the monthly returns
 Ex-ante Sharpe Ratio for the efficient frontier data points is calculated using historical 3-month treasury bill returns as the risk free rate
For creating the Portfolio 1 – Single Efficient Frontier, we have selected 20 stocks from different industries of S&P 500. Those twenty stocks are – Autodesk
Inc. (ADSK), Alphabet Inc. (GOOGL), American Express Company (AXP), Apple Inc. (AAPL), Coca-Cola Company (KO), FedEx Corporation (FDX), Intel
Corporation (INTC), Microsoft Corporations (MSFT), Nike Inc. (NKC), Verizon Communications Inc. (VZ), PPG Industries Inc. (PPG), Pfizer Inc. (PFE),
Electronic Arts Inc. (EA), Caterpillar Inc. (CAT), AutoZone Inc. (AZO), Air Products and Chemicals Inc. (APD), Best Buy Co. Inc. (BBY), CVS Health
Corporation (CVS), Amazon.com Inc. (AMZN), J P Morgan Chase & Co. (JPM). We have used these company’s 7 years data from January-2012 to
December-2020. We have created efficient frontier curve of these 20 stocks. From that efficient frontier curve, we have found this portfolio’s Tangency
portfolio or Sharpe Ratio. The highest one is 2.06. Then we have calculated the global minimum variance portfolio. From the point of global minimum
variance, we have found the Standard Deviation is 9.19%, Expected Return 16.15%, and Sharpe Ratio 1.684. If Mr. Tim’s risk aversion score is 4, he should
invest –
E ( Rp ) −Rf
Sharpe Ratio =
σp
0.2534−Rf
 2.06 =
0.1196
 0.2534 – Rf = 0.246376
 - Rf = 0.246376 – 0.2534
 - Rf = - 0.007024
 Rf = 0.007024
 Rf = 0.7024%
Now, calculating proportion:
E ( Rp ) −Rf
Y=
A∗σ 2
0.2534−0.007024
 Y=
4∗0.11962
 Y = 4.30 or 430%
If the risk aversion score of Mr. Tim is 4, he should invest 430% in this portfolio.
For creating the Portfolio 2- Dual Efficient Frontier, we have selected 10 stocks out of 20 stocks which are Autodesk Inc. (ADSK), Alphabet Inc.
(GOOGL), FedEx Corporation (FDX), Intel Corporation (INTC), Microsoft Corporations (MSFT), Verizon Communications Inc. (VZ), Electronic Arts
Inc. (EA), Caterpillar Inc. (CAT), Amazon.com Inc. (AMZN), J P Morgan Chase & Co. (JPM). The tangency portfolio or Sharpe Ratio of Portfolio 2 Dual
Efficient Frontier is 1.899 whereas the tangency portfolio or Sharpe Ratio of Portfolio 1 Single Efficient Frontier is 2.06. Therefore, the Portfolio 1 Single
Efficient Frontier has the highest Sharpe Ration than Portfolio 2 Dual Efficient Frontier. As a result, Mr. Tim can invest in Portfolio 1 Single Efficient
Frontier since it has the highest Sharpe Ratio. From the point of Global minimum variance portfolio 2 Dual Efficient Frontier, we have found the Standard
Deviation is11.18%, Expected Return 17.79%, and Sharpe Ratio 1.540 whereas the from the point of global minimum variance, we have found the
Standard Deviation is 9.19%, Expected Return 16.15%, and Sharpe Ratio 1.684. Therefore, the global minimum variance of Portfolio 1 Single Efficient
Frontier is better than the Portfolio 2 Dual Efficient Frontier as the Standard Deviation of Portfolio 1 Single Efficient Frontier is less (9.19%) than the
Portfolio 2 Dual Efficient Frontier (11.18%). Hence, Mr. TIM will invest in Portfolio 1 Single Efficient Frontier.
E ( Rp ) −Rf
Sharpe Ratio =
σp
.2667−Rf
 1.899 =
0 .1369
 0.2667 – Rf = 0.2599731
 - Rf = 0.2599731– 0.2667
 - Rf = - 0.0067269
 Rf = 0.0067269
 Rf = 0. 6727%
E ( Rp ) −Rf
Y=
A∗σ 2
0.2667−0.0067269
 Y=
3∗0.13692
 Y = 4.62 or 462%
For creating the Portfolio 3 - Equal Efficient Frontier, we have created an equal weighted portfolio of the 20 stocks using the same weight which is 5%. The
tangency portfolio or sharp ratio of Equal weighted portfolio is 1.65 which is the highest one. In compare to tangency portfolio/sharp ratio of Equal Efficient
Frontier from Portfolio 3, the highest tangency portfolio or sharp ratio of Single Efficient Frontier is 2.06 from Portfolio 1. So, between these two portfolios the
highest tangency portfolio or sharp ratio is 2.06 from portfolio 1 - Single Efficient Frontier. As a result, investors should invest in portfolio 1 - Single Efficient
Frontier since its tangency portfolio is the highest. Therefore, between Portfolio 1 and Portfolio 3 Tim should invest in Portfolio 1 as it has the highest tangency
portfolio or sharp ratio. GLOBAL MINIMUM VARIANCE. If Mr. Tim’s risk aversion score is 4, he should invest –
E ( Rp ) −Rf
Sharpe Ratio =
σp
0.2111−Rf
 1.65 =
0.1236
 0.2111 – Rf = 0.20394
 - Rf = 0.20394 – 0.2111
 - Rf = - 0.00716
 Rf = 0.00716
 Rf = 0.716%
E ( Rp ) −Rf
Y=
A∗σ 2
0.2111−0.00716
 Y=
4∗0.12362
 Y = 3.33 or 333%
If the risk aversion score of Mr. Tim is 4, he should invest 333% in this portfolio.

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Portfolio Visualizer Efficient Frontier

Portfolio 1 – Single Efficient Frontier

Start Date 01/01/2012

Efficient Frontier Assets

Ticker Name Allocation

Portfolio Expected Return Expected Volatility Sharpe Ratio

Portfolio 2 – Dual Efficient Frontier

Start Date 01/01/2012

Efficient Frontier #1 Assets

Ticker Name Allocation

Portfolio 3- Equal weighted portfolio

Start Date 01/01/2012

Efficient Frontier Assets

Ticker Name Allocation

Portfolio Expected Return Expected Volatility Sharpe Ratio

Now, calculating proportion:

Now, calculating proportion:

Now, calculating proportion:

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