Examining Risk and Return Characteristics of a Two Asset Portfolio

Profile of Individual Assets

Expected Two Asset Portfolio

Asset Return Risk
35%
1 15% 10%
2 30% 15% 30%
25%

Return %
Correltion coefficient of returns between the assets = 20% -0.5
15%
10%
Weights Portfolio
5%
Standard Expected
Portfolio # Asset 1 Asset 2 Deviation Return 0%4% 6% 8% 10% 12% 14% 16%
1 100% 0% 10.00% 15.00%
Risk (Standard Deviation) %
2 90% 10% 8.35% 16.50%
3 80% 20% 7.00% 18.00%
4 70% 30% 6.14% 19.50%
5 60% 40% 6.00% 21.00%
6 50% 50% 6.61% 22.50%
7 40% 60% 7.81% 24.00%
8 30% 70% 9.37% 25.50%
9 20% 80% 11.14% 27.00%
10 10% 90% 13.03% 28.50%
11 0% 100% 15.00% 30.00% <=B25*$B$7+C25*$B$8

=SQRT(B25^2*$C$7^2+C25^2*$C$8^2+2*$F$10*B25*C25*$C$7*$C$8)
io

2% 14% 16%
n) %
Quarterly Return of Selected Funds during the Past Five Years

Fund # MF1 MF2 MF3 MF4 MF5 MF6 MF7 MF8

ICICI Pru Quantum DSP-BR Reliance ICICI Pru

SBI HDFC HDFC
Focused Long- Micro Cap Equity Exp&Othe
Quarter Emerging Balanced Prudence
Bluechip Term Fund - RP Oppor - r Services-
Busi (G) Fund (G) Fund (G)
Eqty (G) Equity (G) (G) RP (G) RP (G)

2015 Q1 2.90% 0.10% -13.70% -14.70% -6.40% -11.40% -1.00% -4.20%

2015 Q2 41.60% 44.30% 66.00% 66.20% 47.50% 49.10% 37.60% 47.00%
2015 Q3 19.20% 23.40% 30.50% 15.70% 27.40% 19.80% 14.10% 18.20%
2015 Q4 -0.20% -0.20% 14.10% -0.20% -0.20% 5.60% 8.50% -0.20%
2016 Q1 3.40% 1.90% 9.20% 4.60% 5.40% 1.80% 4.00% 4.10%
2016 Q2 2.90% 6.10% 9.40% 0.20% 5.00% 0.40% 6.70% 6.60%
2016 Q3 15.40% 16.20% 14.20% 19.10% 18.30% 14.30% 9.90% 12.50%
2016 Q4 1.20% 0.20% -4.40% 0.10% -2.60% -1.90% 0.60% -0.70%
2017 Q1 -2.60% -5.80% -14.70% -9.00% -7.30% -4.90% -3.10% -3.20%
2017 Q2 -1.00% -2.50% 1.50% 4.90% 2.60% -2.70% 4.60% 1.60%
2017 Q3 -9.40% -8.70% -5.20% -1.40% -8.90% -10.70% -5.10% -6.80%
2017 Q4 -2.40% -4.00% -13.50% -8.10% -8.50% -7.30% -6.60% -7.50%
2018 Q1 12.70% 17.10% 20.00% 14.60% 21.10% 17.80% 15.50% 16.00%
2018 Q2 -0.60% -1.90% 0.40% 3.10% 1.40% -3.20% -0.80% -1.10%
2018 Q3 8.10% 8.60% 9.60% 10.20% 10.70% 9.30% 6.20% 6.50%
2018 Q4 4.40% 3.80% 4.50% 13.00% 5.40% 5.20% 2.50% 5.10%
2019 Q1 -4.90% -3.90% -15.80% -12.50% -7.90% 1.90% -5.80% -8.60%
2019 Q2 1.80% -0.60% -0.70% -1.70% -3.10% 2.10% -0.30% -0.40%
2019 Q3 1.30% -1.10% -4.50% -8.40% -4.30% 17.00% -2.30% -7.30%
2019 Q4 10.00% 12.30% 24.90% 13.10% 19.50% 16.30% 15.40% 17.10%
Mean returns 5.19% 5.27% 6.59% 5.44% 5.76% 5.93% 5.03% 4.74%

Excess Return of Selected Funds during the Past Five Years

Fund # MF1 MF2 MF3 MF4 MF5 MF6 MF7 MF8

ICICI Pru Quantum DSP-BR Reliance ICICI Pru

SBI HDFC HDFC
Focused Long- Micro Cap Equity Exp&Othe
Quarter Emerging Balanced Prudence
Bluechip Term Fund - RP Oppor - r Services-
Busi (G) Fund (G) Fund (G)
Eqty (G) Equity (G) (G) RP (G) RP (G)

2015 Q1 -2.29% -5.17% -20.29% -20.14% -12.16% -17.33% -6.03% -8.94%

2015 Q2 36.41% 39.04% 59.41% 60.76% 41.75% 43.18% 32.57% 42.27%
2015 Q3 14.01% 18.14% 23.91% 10.26% 21.65% 13.88% 9.07% 13.47%
2015 Q4 -5.39% -5.47% 7.51% -5.64% -5.96% -0.33% 3.47% -4.94%
2016 Q1 -1.79% -3.37% 2.61% -0.84% -0.36% -4.13% -1.03% -0.64%
2016 Q2 -2.29% 0.83% 2.81% -5.24% -0.76% -5.53% 1.67% 1.87%
2016 Q3 10.21% 10.94% 7.61% 13.66% 12.55% 8.38% 4.87% 7.77%
2016 Q4 -3.99% -5.07% -10.99% -5.34% -8.36% -7.83% -4.43% -5.44%
2017 Q1 -7.79% -11.07% -21.29% -14.44% -13.06% -10.83% -8.13% -7.94%
2017 Q2 -6.19% -7.77% -5.09% -0.54% -3.16% -8.63% -0.43% -3.14%
2017 Q3 -14.59% -13.97% -11.79% -6.84% -14.66% -16.63% -10.13% -11.54%
2017 Q4 -7.59% -9.27% -20.09% -13.54% -14.26% -13.23% -11.63% -12.24%
2018 Q1 7.51% 11.84% 13.41% 9.16% 15.35% 11.88% 10.47% 11.27%
2018 Q2 -5.79% -7.17% -6.19% -2.34% -4.36% -9.13% -5.83% -5.84%
2018 Q3 2.91% 3.34% 3.01% 4.76% 4.95% 3.38% 1.17% 1.77%
2018 Q4 -0.79% -1.47% -2.09% 7.56% -0.36% -0.73% -2.53% 0.36%
2019 Q1 -10.09% -9.17% -22.39% -17.94% -13.66% -4.03% -10.83% -13.34%
2019 Q2 -3.39% -5.87% -7.29% -7.14% -8.86% -3.83% -5.33% -5.14%
2019 Q3 -3.89% -6.37% -11.09% -13.84% -10.06% 11.08% -7.33% -12.04%
2019 Q4 4.81% 7.04% 18.31% 7.66% 13.75% 10.38% 10.37% 12.37%
 Summary of Return and Risk

MF9 MF10 Fund # MF1

ICICI Pru
Birla Sun
R* Shares Focused
Life GSec Fund Name
Golld ETF Bluechip
- LTF (G)
Eqty (G)

7.40% 10.40% Average Return per Quarter 5.19%

4.70% -4.10% Annual Return 22.43%
1.80% 7.70% Variance per Quarter 1.15%
1.70% -0.20% Annual Variance of Returns 4.61%
1.20% -2.80% Srandard Deviation of Returns 21.47%
5.70% 14.20% 10.74%
1.40% 1.50% 0.2147062
1.10% 7.30%
1.20% 1.30% Fund Return
1.10% 4.90% ICICI Pru Focused Bluechip Eqty (G) 5.19%
1.40% 19.20% Quantum Long-Term Equity (G) 5.27%
3.20% 2.00% DSP-BR Micro Cap Fund - RP (G) 6.59%
2.00% 3.80% SBI Emerging Busi (G) 5.44%
3.40% 3.50% Reliance Equity Oppor - RP (G) 5.76%
2.00% 5.20% ICICI Pru Exp&Other Services-RP (G) 5.93%
2.40% -2.30% HDFC Balanced Fund (G) 5.03%
2.60% -2.80% HDFC Prudence Fund (G) 4.74%
5.20% -15.60% Birla Sun Life GSec - LTF (G) 2.21%
-6.60% 16.00% R* Shares Golld ETF 3.08%
1.30% -7.60%
2.21% 3.08% Total weights

Return
MF9 MF10 Variance

Birla Sun
R* Shares
Life GSec
Golld ETF
- LTF (G)
Standard Deviation
5.19% 7.32% Sharpe Ratio
2.49% -7.18%
-0.41% 4.62%
-0.51% -3.28%
-1.01% -5.88%
3.49% 11.12%
-0.81% -1.58%
-1.11% 4.22%
-1.01% -1.78%
-1.11% 1.82%
-0.81% 16.12%
 0.99% -1.08%
-0.21% 0.72%
1.19% 0.42%
-0.21% 2.12%
0.19% -5.38%
0.39% -5.88%
2.99% -18.68%
-8.81% 12.92%
-0.91% -10.68%

Final Portfolio

Annual
Asset Return
ICICI Pru Focused Bluechip Eqty (G) 22.43%
Quantum Long-Term Equity (G) 22.78%
DSP-BR Micro Cap Fund - RP (G) 29.08%
SBI Emerging Busi (G) 23.60%
Reliance Equity Oppor - RP (G) 25.08%
ICICI Pru Exp&Other Services-RP (G) 25.89%
HDFC Balanced Fund (G) 21.69%
HDFC Prudence Fund (G) 20.33%
Birla Sun Life GSec - LTF (G) 9.14%
R* Shares Golld ETF 12.90%
Risk Free Asset 8.00%
Total
 MF2 MF3 MF4 MF5 MF6 MF7 MF8 MF9 MF10

Quantum DSP-BR Reliance ICICI Pru

SBI HDFC HDFC Birla Sun
Long- Micro Cap Equity Exp&Othe R* Shares
Emerging Balanced Prudence Life GSec
Term Fund - RP Oppor - r Services- Golld ETF
Busi (G) Fund (G) Fund (G) - LTF (G)
Equity (G) (G) RP (G) RP (G)

5.27% 6.59% 5.44% 5.76% 5.93% 5.03% 4.74% 2.21% 3.08%

22.78% 29.08% 23.60% 25.08% 25.89% 21.69% 20.33% 9.14% 12.90%
1.47% 3.51% 2.85% 2.03% 1.84% 1.00% 1.59% 0.07% 0.64%
5.89% 14.06% 11.42% 8.11% 7.35% 4.00% 6.37% 0.28% 2.56%
24.26% 37.49% 33.79% 28.48% 27.11% 20.01% 25.25% 5.32% 16.01%
12.13% 18.75% 16.90% 14.24% 13.56% 10.00% 12.62% 2.66% 8.01%
0.2426135 0.3749341 0.3379026 0.2847634 0.2711441 0.2000581 0.252476 0.0532199 0.1601195

Weights
20.00%
0.00%
0.00%
0.00%
0.00%
20.00%
20.00%
0.00%
20.00%
20.00%

100.00% < =SUM(R15:R24)

4.29% < =MMULT(TRANSPOSE(R15:R24),Q15:Q24)

#NAME? < =MMULT(MMULT(TRANSPOSE(R15:R24),AD6:AM15),R15:R24)

6.41% < =SQRT(S29)

0.3567615 < =(S28-0.02)/S30 (assuming risk free rate is 8%)

To maximise Sharpe Ratio, Solver can be used.

The market portfolio has following characteristics
Expected Return = 4.29%
Standard Deviation = 6.41%
 Weights
Market Final
Portfolio Portfolio
20.00% 15.60%
0.00% 0.00%
0.00% 0.00%
0.00% 0.00%
0.00% 0.00%
20.00% 15.60%
20.00% 15.60%
0.00% 0.00%
20.00% 15.60%
20.00% 15.60%
22.00%
100.00%
 Variance-Covariance Matrix

ICICI Pru Quantum

Focused Long-
Formula in previous column
Bluechip Term
Eqty (G) Equity (G)

< =AVERAGE(M6:M25) ICICI Pru Focused Bluechip Eqty (G) #NAME? #NAME?
< =(1+AA6)^4-1 Quantum Long-Term Equity (G) #NAME? #NAME?
< =VARP(M6:M25) DSP-BR Micro Cap Fund - RP (G) #NAME? #NAME?
< =4*AA8 SBI Emerging Busi (G) #NAME? #NAME?
< =SQRT(AA9) Reliance Equity Oppor - RP (G) #NAME? #NAME?
ICICI Pru Exp&Other Services-RP (G) #NAME? #NAME?
HDFC Balanced Fund (G) #NAME? #NAME?
HDFC Prudence Fund (G) #NAME? #NAME?
Birla Sun Life GSec - LTF (G) #NAME? #NAME?
R* Shares Golld ETF #NAME? #NAME?
 DSP-BR Reliance ICICI Pru
SBI HDFC HDFC Birla Sun
Micro Cap Equity Exp&Othe R* Shares
Emerging Balanced Prudence Life GSec
Fund - RP Oppor - r Services- Golld ETF
Busi (G) Fund (G) Fund (G) - LTF (G)
(G) RP (G) RP (G)

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