Portfolio Analysis Solver
Calculate portfolio risk and return with diversification effects
Enter Your Portfolio Data
Asset 1
Asset 2
Correlation Matrix
| Asset 1 | Asset 2 | |
|---|---|---|
| Asset 1 | 1 | |
| Asset 2 | 1 |
Note: Weights must sum to 1.0. Current sum: 1.00
Used for Sharpe ratio: (E(Rp) − Rf) / σp. Same units as expected returns.
CSV: asset,expectedReturn,stdDev,weight; then corr rows; meta riskFreeRate. After Solve, also Export results CSV.
Theory of Portfolio Analysis
Example Problem:
Asset 1: Return = 12%, Risk = 15%, Weight = 60%
Asset 2: Return = 18%, Risk = 25%, Weight = 40%
Correlation: 0.3
Solution:
Portfolio Return = 0.6 × 12% + 0.4 × 18% = 14.4%
Weighted Avg Risk = 0.6 × 15% + 0.4 × 25% = 19%
Portfolio Risk = √[0.6²×15² + 0.4²×25² + 2×0.6×0.4×15×25×0.3] ≈ 14.8%
Diversification Benefit = 19% - 14.8% = 4.2%
1. What is the main benefit of portfolio diversification?
2. What does a correlation coefficient of -1 between two assets mean?
3. How is portfolio expected return calculated?
4. What does a diversification ratio greater than 1 indicate?