Pepsi is a great stock to have in anyone's portfolio.

Unlike Coca-Cola,
who generates about 2/3 of its sales from soft drinks, Pepsi is a much
more diversified company. Pepsi owns multiple well known brands such
as Frito-Lay, Tropicana, Quaker, Cap'n Crunch and Gatorade; and unlike
Coca-Cola, only generates 1/3 of its sales from soft drinks.
Microsoft has a very strong financial position. This supports the
quarterly dividend payments, repurchases of its own shares and
enables the company to make investments. Therefore, I added
Microsoft shares to my portfolio.
Nike has been on the cutting edge of sporting goods technology. For
the long haul, the prospects for Nike are bright. There is probably lots
of room for growth in North America as the company continues to offer
cutting-edge products.
The Boeing Company is a better defense play than most of its peers
because of its diversified revenue base. At the same time, there is
tremendous excitement for the 777X family of aircraft. Over the next
20 years, this could represent solid growth for the company and Boeing
stock.
Bank of America, the company that is worth more than where the
market values its stock.

The change in annual return has been calculated for the five
companies during the time period from 1998 2013 (15 years) and
average return is also calculated which is given in the table below:

Annual Return
Year

Pepsi

Microsoft

21.2%

-14.2%

3.1%

-2.9%

3
4

1.6%
7.5%

-22.8%
-1.8%

5
6
7

11.0%
-27.8%
21.3%

2.7%
8.5%
-3.3%

5.9%

25.7%

13.2%

-3.3%

10

12.0%

-27.4%

11

10.4%

53.9%

12

-13.3%

-13.2%

13

-1.8%

26.8%

14

40.6%

6.4%

15

-13.8%

28.8%

Averag
e

6.1%

4.3%

Nike

29.79
%
3.20%
28.08
%
0.95%
35.09
%
7.38%
7.28%
32.57
%
25.81
%
20.05
%
47.17
%
10.04
%
37.87
%
15.44
%
18.47
%
14.2%

Boeing

Bank of
America

81.1%

-29.17%

2.7%

19.42%

12.4%
20.6%

34.44%
5.87%

26.9%
-51.2%
-1.6%

12.99%
16.38%
15.74%

26.5%

6.38%

35.7%

-22.09%

22.9%

-74.62%

27.7%

100.11%

-14.9%

-30.88%

-41.2%

-33.64%

59.3%

52.55%

27.0%

41.21%

15.6%

7.6%

From the above table it is evident that Boeing has the maximum return
of 15.60%, followed by Nike with 14.2%.Bank of America comes third in
the portfolio with 7.6%, followed by Pepsi in the fourth place with 6.1%.
Microsoft stood at the last place with an average return of 4.3%.
Using the NLP model I could come up with the optimal mix of
investments that should hold in my portfolio to minimize the risk of the
portfolio while achieving a desired level of return.

Pepsi

Pepsi
Walma
rt
Ford
Boein
g
Fedex

0.0252895
26
0.0046114
57
0.0039534
12
0.0377496
15
0.0053201
58

Microsoft

Nike

0.0046114
57

0.0039534
12

0.0442767
6

0.0291546
75

0.0291546
75
0.0076760
66
0.0526865
16

0.0431131
56
0.0165993
38
0.0445805
95

Boeing

BOFA

0.0377496
15
0.0076760
66
0.0165993
38

0.0053201
58

0.1086645
42
0.0164122
31

0.0164122
31
0.1661416
02

0.0526865
16
0.0445805
95

The portfolio can get can a minimum return of 8% with a minimum risk
of 1.3 % .The portfolio can also increase its return upto 10% with a
slight increase in risk uptil 1.4%.
require
d
return Risk
8
1.3
9
1.4
10
1.4

The portfolio can get maximum return of 15.6%, but the risk associated
with it is 10.9%, where all the amount has to be invested in boeing

Portfol
io

Pepsi

Micros
oft

0.000

0.000

Nike

Boein
g

BOFA

0.000

1.000

0.000

1.000

But if we reduce the required return from 15.6 % to 15%, the risk
associated with it can be reduced to 3.6 % with the total amount
scattered between Nike and Boeing

Portfol
io

Pepsi

Micros
oft

0.000

0.000

Nike

Boein
g

BOFA

0.425

0.575

0.000

1.000

Using the same model, the following table is formulated with the risk
associated with the rate of return that can be earned by the portfolio.

return risk
4
1.3
4.3
1.3
5
1.3
6
1.3
7
1.3
8
1.3
9
1.4
10
1.4
11
1.6
12
1.7
13
1.9
14
2.2
15
3.6
15.6
10.9
The following graph shows the efficient frontier of the portfolio

12
10
8
6
4
2
0
4.0 4.3 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 14.0 15.0 15.6