Introduction: The main concern of this study was to find the tangent portfolio and

to do so we had to analyse lots of data which is taken from Dhaka stock exchange.
The study has been done on 10 stocks from Dhaka Stock Exchange(DSE). 5 years
monthly data has been collected to calculated the monthly return,variance and
standard deviation. The result is shown below. For detail please see the excel work
sheet.
monthly
Stocks

return

Variance

Lankabangla Finance Ltd.

1.16%

3.1457%

Delta Life Insurance

1.93%

2.8736%

Aftab Automobiles

2.58%

6.7393%

Delta Spinners

4.88%

10.9000%

Square Textile

0.66%

1.7247%

Aramit

0.97%

2.6858%

Square Pharma

3.02%

3.3838%

Heidelberg Cement Bd.

0.30%

2.4778%

Agni Systems Ltd.

1.14%

3.7202%

BEXIMCO

3.72%

6.6864%

SD
17.74%
16.95%
25.96%
33.02%
13.13%
16.39%
18.40%
15.74%
19.29%
25.86%

Return-Risk graph: the return risk graph has given below. From the graph we can
see that the extra risk is rewarded with extra return which is know as risk premium.

Graph: Risk-return
Lankaban

Delta

gla

Life

Aftab

CORRELATI

Finance

Insuran

ON
Lankabangl

Ltd.

ce

Squar

Squar

Heidelbe

Agni

Delta

rg

Syste

Automobil

Spinne

Textil

Aram

Phar

Cement

ms

BEXIMC

es

rs

it

ma

Bd.

Ltd.

0.040

0.32

0.291

0.147

0.2194

Finance

Ltd.
Delta

0.241

-0.01

0.1087 06
0.071

16
0.17

5
0.245

0.1349

7
0.092

0.208

0.3747 7

54

0.7821

-0.0217

0.517

0.25

0.443

0.382

0.2218

0.4378 63
0.386

88
0.36

1
0.370

0.288

2
0.508

8
0.2042

47

59
0.45

9
0.433

0.5359

6
0.3434

81

8
0.512

0.3045

0.507
0.467

4
0.6936

0.2837

8
0.274

2
0.4668

0.3329

0.303

0.1320

Life

Insurance
Aftab
Automobile
s
Delta
Spinners
Square
Textile
Aramit
Square
Pharma
Heidelberg

Cement
Bd.
Agni

Systems
Ltd.
BEXIMCO

0.3136
1

2
1

Correlation between the 10 stocks:

Beta and Coefficient: Beta is the measure of stock sensitivity with market
movement. Here DGEN has taken as proxy of market to calculate the beta of 10
stocks. From the table we can see that Delta Spinners had the highest beta (1.33) and lowest beta
Delta Life Insurance(0.41). The result has given below.

COVAR
0.005171

VAR
0.009166

BETA
0.5641

37
Life 0.003772

39
0.009166

66
0.4115

Insurance

21
0.006062

39
0.009166

26
0.6614

Aftab Automobiles

77
0.012171

39
0.009166

13
1.3278

Delta Spinners

99
0.006972

39
0.009166

93
0.7606

Square Textile

64
0.007901

39
0.009166

75
0.8619

Aramit

04
0.008023

39
0.009166

58
0.8753

Square Pharma
Heidelberg

88
0.007266

39
0.009166

59
0.7927

Cement Bd.

29
0.007037

39
0.009166

1
0.7677

Agni Systems Ltd.

38
0.007970

39
0.009166

37
0.8695

BEXIMCO

62

39

48

Lankabangla
Finance Ltd.

Delta

Return and covarience of the selected stock:

covar
Aftab
Lankabangla

Delta

Finance Ltd.

Insurance

es

s
0.00625

Finance Ltd.
7
Delta
Life 0.0193

0.030924

0.007109

-0.00063

9
0.02061

Insurance

0.007109

0.028249

0.009018

Lankabangla

return
0.0115

02

Life Automobil

Delta
Spinner

Aftab

0.0258

0.03688

Automobiles

03
0.0487

-0.00063

0.009018

0.066251

5
0.10715

Delta Spinners

0.006259

0.020616

0.036885

Snapshort of tangent porfolio calculation:

Total weight

WL

WD

WA

WD

RISKP RETUR

S-P

42.22

38.98

18.81

0.00%

12.53

NP
1.73%

GMV

0.0834

%
26.79

%
33.77

%
16.80

22.64

%
14.76

2.50%

UL1

64
0.1233

%
17.55

%
29.92

%
14.94

%
37.59

%
17.67

3.00%

UL2

37
0.1312

%
8.32%

%
26.08

%
13.07

%
52.53

%
21.22

3.50%

UL3

93
0.1329

8.27%

%
26.06

%
13.06

%
52.61

%
21.23

3.50%

TP

22
0.1329

22

Efficient forntier: The below table is representing the efficient frontier line where
the tangent is positioned.
RISKP RETUR
12.53

NP
1.73%

Gmv

%
14.76

2.50%

ul1

%
17.67

3.00%

UL2

%
21.22

3.50%

UL3

Graph: efficient frontier

Porfolio with risk free rate and tangent: we have already calculated the
efficient frontier and now we have calculated the tangent which is show in below by
graph. We have to invest 18% to risk free security and rest 82% on tangent portfolio
to get the maximum return with minimum risk.

Retur
Risk
0.00%
21.23

n
0.64%

Rf

3.50%

TP

Graph: tangent & risk free rate

Tangent calculation with 6 stocks: for the better portfolio we had create
another portfolio with 6 stocks. The detail calculation is attach on excel file. The
snapshort is given below.

Retur

Lankaban

covar
Delta

gla

Life

Automo

Spinn

Finance

Insuran

biles

ers

Textil

Ltd.
0.030924

ce
0.00710

-0.00063

0.006

e
0.000

0.00919

259

917

0765

Lankaban

0.011

gla

57

Aftab

Delta

Squar

Aramit

Finance
Ltd.
Delta Life 0.019

0.007109

0.02824

0.00901

0.020

0.001

0.00478

Insurance
Aftab

302
0.025

-0.00063

9
0.00901

8
0.06625

616
0.036

569
0.017

9164
0.01082

Automobi

803

885

348

4158

les
Delta

0.048

0.006259

0.02061

0.03688

0.107

0.016

0.01946

Spinners
Square

79
0.006

0.000917

6
0.00156

5
0.01734

153
0.016

472
0.016

4065
0.00969

Textile
Aramit

647
0.009

0.009191

9
0.00478

8
0.01082

472
0.019

954
0.009

28
0.02640

464

693

261

688

Efficient frontier:
SUM

WL
21.61

WD
24.05

WA

WD

WS
48.57

War

%
22.20

%
30.05

0.00%

0.00%

%
32.47

5.77%

%
23.97

%
31.55

5.72%
10.68

5.29%
14.47

%
18.11

4.26%

%
26.79

%
33.77

%
16.80

%
22.64

1.23%

%
26.61

%
13.33

%
50.45

0.00%

0.00%

9.60%
%
RETUR

0.00%

0.00%

RISKP

NP

S-P
0.0468

9.68%

1.09%

Gmv

02
0.0818

10.51%

1.50%

UL1

04
0.1100

12.36%

2.00%

UL2

28
0.1260

14.76%

2.50%

UL3

47
0.1348

20.70%

3.43%

TP

Graph: Efficient frontier

Tangent portfolio: tangent portfolio with 6 stocks is better than previous portfolio
as the risk reduced significantly. However return is also declined.

Graph: tangent

Conclution: The tengent portfolio has been created with different combinations to
find the best possible investment opportunity with minimum risk while maximizing

return. From the total calculation it can be stated that the more the diversifed
assets are included in the portfolio the better the portfolio become.