Month

0
1
2
3
4
5
6
7
8
9
10
11
12

Stock A
25.00
24.12
23.37
24.75
26.62
26.50
28.00
28.88
29.75
31.38
36.25
37.13
36.88

Stock1
Average
3.41%
Stdev
5.25%
Correltion Matrix
Stock1
Stock1
1.0000
Stock2
0.5136
Stock 1

W matrix

P rt
P var
P std

Stock B
45.00
44.85
46.88
45.25
50.87
53.25
53.25
62.75
65.50
66.87
78.50
78.00
68.23

Stock2
3.86%
8.69%
Stock2
0.5136
1.0000

Returns1 Returns 2

-0.0352
-0.0311
0.0591
0.0756
-0.0045
0.0566
0.0314
0.0301
0.0548
0.1552
0.0243
-0.0067

-0.0033
0.0453
-0.0348
0.1242
0.0468
0.0000
0.1784
0.0438
0.0209
0.1739
-0.0064
-0.1253

W1

Co Variance matrix

Stock1
Stock2

W2

0.5
0.5
-0.03583 continous returns

Stock1
0.0028
0.0023

Note the way it is multiplied

Stock2
0.0023
0.0076

Stock 2
0.5

0.5

3.64%
0.37%
6.12%

Control+ shift +Enter ( for all matrix operations)

(W*Covariance Matrix*W(Transp

Weights
0.00%
7.50%
15.00%
22.50%
30.00%
37.50%
45.00%
52.50%
60.00%
67.50%
75.00%
82.50%
90.00%
97.50%
105.00%
112.50%
120.00%
127.50%
135.00%
142.50%
150.00%
157.50%

(W*Covariance Matrix*W(Transpose))

Portfolio selection model

Stock input data

Mean return
StDev of return

Stock 1
0.14
0.2

Stock 2
0.11
0.15

Stock 3
0.1
0.08

Correlations
Stock 1
Stock 2
Stock 3

Stock 1
1
0.6
0.4

Stock 2
0.6
1
0.7

Stock 3
0.4
0.7
1

Stock 1
0.5

Stock 2
0

Stock 3
0.5

Investment decisions

Fractions to invest
Constraint on expected portfolio return

Actual
0.12
Portfolio variance

Portfolio stdev

0.0148
0.1217

>=

Required
0.12

Total
1

Covariances
Stock 1
Stock 2
Stock 3

Stock 1
0.04
0.018
0.0064

Stock 2
0.018
0.0225
0.0084

Stock 3
0.0064
0.0084
0.0064

Required
1
Range names used:
MeanReturns - B5:D5
LTable - B4:D6
CovarMat - H9:J11
Invested - B15:D15
TotInvested - E15
ExpReturn - B19
ReqdReturn - D19
PortVar - B21

Risk & return with three assets

Asset Data

Return
Stdev

Correlation Matrix

St1
St2
St3
VCV matrix

St1

St2

St3

0.6%
4.3%

2.1%
10.1%

9.0%
20.8%

St1
1.00
0.63
0.09

St2

St3

St1

St2

St3

St1
40.0%

St2
50.0%

St3
10.0%

0.63

0.09
0.23

1.00
0.23

1.00

St1
St2
St3

Portfolio weights

Exp Ret
Variance
Std Dev

Target exp return

7.0%

Oneway analysis for Solver model in Optimization worksheet

Invested_2

Invested_3

$B$19

$B$22

0.1
0.11
0.12
0.13
0.14

Invested_1

Input (cell $D$19) values along side, output cell(s) along top

0.0
0.2
0.5
0.7
1.0

0
0
0
0
0

1
0.75
0.5
0.25
0

0.10
0.11
0.12
0.13
0.14

0.0800
0.0922
0.1217
0.1591
0.2000

Sensitivity of Invested_1 to Input

Invested_1

Data for chart

When you select an output from the

dropdown list in cell $K$4, the chart will
adapt to that output.

3.73E-08
0.25
0.5
0.75
1

Sensitivity of Invested_1 to Input

1.2
1
0.8
0.6
0.4
0.2
0
0.100000001

0.109999999

0.120000005
Input ($D$19)

0.129999995

0.140000001