Portfolio Analysis

1 Build Your own Portfolio

Select Any stock as you want and take the S&P500 as benchmark

• Choose initial 31 stocks from utility sectors as example
• Take an overview on their perfoimaces in the past 5 years (too many overlaps here)

Breakdown to Individual Stock

• S&P500 as becnhmark only has increaeed by 1.8 times in the past 5 years
• AMRC has tenfold in the past 5 years.
• MSEX has triple in the past 5 years.
• TTEK has quadrupled.
• AWR,AWK,GWRS and MYRG all have doubled than 5 years before

Pay Attention to Stocks outperforamced Benchmark

• You should really take AMRC consideration
• After removing the AMRC and amplifing the trends of other stocks
• we found those stocks seem are good to be included in portfolio, which could provide profibility factors

Dig into Monthly Returns of Selected Factors

• seems all are stationary time serises

Augmented Dickey-Fuller Test (ADF)

• The results of p-value prove that they are all strong stationary
• means you can regard its average monthly return as a expected monlthy return in a long-term aspect

Overview of Expected Monthly Return for individual Stock

• AQUA and MTZ has a high expected return but has been ignored before
• Drop those stocks have negative expected returns

Estimated Risk (Standard Deviation)

• ARTNA has a trait on stability that could lower the risk for the portfolio

Sharpe Ratios for Selected Stocks

Based on all analysises above, I will pick out stocks into my profolio as belows :

• AMRC,TTEK,MYRG,AQUA,MSEX,MTZ,AWK,GWRS,AWR(Profibility factors)
• ARTNA (low risk factor)

2 Optimize Portfolio

Correlation Matrix of Portfolio

• Highlighting the weak correlations (<= 0.2)
• The portfolio looks well diversified

Using Monte Carlo to Simulate Market Efficient Frontier

• Efficient Frontier helps in giving optimal weights to each stocks in your portfolio
• For the convenience of calculation, I setted a minimum weight for each stock, which is 0.1% (tiny but useful)
• By running the simulations for 500k times, the result shows the red star represnting the optimal point has the maximum sharpe ratio, which is 0.406, and yellow star representing the optimal point has the minimum risk,which the standard deviation is only 0.03

Visualizing the Optimiztions

• The model of maximum sharpe ratio suggests to invest on TTEK(29%),AMRC(21.4%),AWR(12.8%),MSEX(28.2%) and MYRG(8%) respectively
• The recent price indexs of big holdings
• AMRC(21.4%) looks like the factor generating most profit, while the rests for lowering the volatility

• The model of minimum volatility suggests to invest on TTEK(29%),AMRC(21.4%),AWR(12.8%),MSEX(28.2%) and MYRG(8%) respectively
• The recent price indexs of big holdings

3 Test the profibility of Portfolio with Benchmark

• The portfolio of max sharpe ratio did apparently outperform S&P500 and it has a similar pattern as AMRC, which implys AMRC did contribute a lot to the whold portfolio even with the holdings of 21.4%.
• The portflio of minmum volatility barely outperform the benckmark but stabler than each individual stock of portfolio.