10 stocks portfolio in excel and efficient frontier and tangent line and capital market line in excel calculation of expected return standard deviation of portfolio calculation of variance covariance metrix te stocks portfol
- 5 months ago
A complete process of building ten stock portfolio in excel
Creating an Excel spreadsheet with an efficient frontier, tangent line, capital market line, and portfolio statistics involves several steps. I'll provide a general outline for each section, but keep in mind that you may need to adapt the details based on your specific data and preferences.
Excel Spreadsheet Outline:
1. Stock Data:
Create a table with historical stock prices for the 10 stocks in your portfolio.
Include columns for each stock's daily or periodic returns.
2. Portfolio Weights:
Allocate weights to each stock in your portfolio. Ensure the weights sum up to 1.
3. Portfolio Returns:
Calculate the expected return of the portfolio using the weighted average of individual stock returns.
4. Portfolio Standard Deviation:
Calculate the standard deviation of the portfolio returns using the formula for portfolio variance.
5. Efficient Frontier:
Create a scatter plot of various portfolios with different combinations of expected return and standard deviation.
Highlight the portfolios that make up the efficient frontier.
6. Tangent Line:
Identify the tangent line that touches the efficient frontier at the point where the Sharpe ratio is maximized.
Calculate the slope of the tangent line using the formula: (Rp - Rf) / σp, where Rp is the portfolio return, Rf is the risk-free rate, and σp is the portfolio standard deviation.
7. Capital Market Line (CML):
Plot the Capital Market Line by combining the risk-free rate and the tangent portfolio.
The CML equation is: CML: E(Rp) = Rf + [ (E(Rm) - Rf) / σm ] * σp, where E(Rp) is the expected return of the portfolio, Rf is the risk-free rate, E(Rm) is the expected return of the market portfolio, σm is the standard deviation of the market portfolio, and σp is the standard deviation of the portfolio.
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Creating an Excel spreadsheet with an efficient frontier, tangent line, capital market line, and portfolio statistics involves several steps. I'll provide a general outline for each section, but keep in mind that you may need to adapt the details based on your specific data and preferences.
Excel Spreadsheet Outline:
1. Stock Data:
Create a table with historical stock prices for the 10 stocks in your portfolio.
Include columns for each stock's daily or periodic returns.
2. Portfolio Weights:
Allocate weights to each stock in your portfolio. Ensure the weights sum up to 1.
3. Portfolio Returns:
Calculate the expected return of the portfolio using the weighted average of individual stock returns.
4. Portfolio Standard Deviation:
Calculate the standard deviation of the portfolio returns using the formula for portfolio variance.
5. Efficient Frontier:
Create a scatter plot of various portfolios with different combinations of expected return and standard deviation.
Highlight the portfolios that make up the efficient frontier.
6. Tangent Line:
Identify the tangent line that touches the efficient frontier at the point where the Sharpe ratio is maximized.
Calculate the slope of the tangent line using the formula: (Rp - Rf) / σp, where Rp is the portfolio return, Rf is the risk-free rate, and σp is the portfolio standard deviation.
7. Capital Market Line (CML):
Plot the Capital Market Line by combining the risk-free rate and the tangent portfolio.
The CML equation is: CML: E(Rp) = Rf + [ (E(Rm) - Rf) / σm ] * σp, where E(Rp) is the expected return of the portfolio, Rf is the risk-free rate, E(Rm) is the expected return of the market portfolio, σm is the standard deviation of the market portfolio, and σp is the standard deviation of the portfolio.
8. YouTube Title, Description, and Tags: