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Table of correlations
Asset A Asset B Asset C Things in dark grey are input parameters
Asset A 1.0000 0.3694 0.1539 Things in light grey are computed intermediat
Asset B 0.3694 1.0000 0.2148 Things in yellow are labels
Asset C 0.1539 0.2148 1.0000 Things in red are "Solver" inputs or outputs
Table of covariances
Asset A Asset B Asset C
Asset A 7.84% 3.41% 1.72%
Asset B 3.41% 10.89% 2.84%
Asset C 1.72% 2.84% 16.00%
Now use "solver" to either minimize the risk for a given return
(ie minimize B37 for a prescribed value of B35) or
maximize return for a given risk (ie, maximize B35 for a given
value of B37).
In both cases B23 should be constrained to equal 1, this is the
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ef
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ef
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Table of correlations
Asset A Asset B Asset C Things in dark grey are input parameters
Asset A 100.00% 36.94% 15.39% Things in light grey are computed intermediat
Asset B 36.94% 100.00% 21.48% Things in yellow are labels
Asset C 15.39% 21.48% 100.00% Things in red are "Solver" inputs or outputs
To find the Market Price of Risk (and hence the Capital Market Line)
use "solver" to maximize cell B44 subject to the constraint that
cell B26 is equal to one.
You access "solver" from the "Tools" menu.
grey are input parameters
grey are computed intermediate things
w are labels
re "Solver" inputs or outputs
efficient frontier
risk return % of asset A % of asset B % of asset C
70.76% 0.00% 100.59% 132.82% -133.41%
65.14% 2.00% 96.14% 123.35% -119.48%
59.59% 4.00% 91.68% 113.88% -105.56%
54.13% 6.00% 87.23% 104.40% -91.63%
48.80% 8.00% 82.77% 94.93% -77.70%
43.62% 10.00% 78.32% 85.46% -63.78%
41.11% 11.00% 76.09% 80.72% -56.81%
38.67% 12.00% 73.86% 75.99% -49.85% short selling
36.31% 13.00% 71.64% 71.25% -42.88%
34.05% 14.00% 69.41% 66.51% -35.92%
31.91% 15.00% 67.18% 61.78% -28.96%
29.92% 16.00% 64.95% 57.04% -21.99%
28.10% 17.00% 62.73% 52.30% -15.03%
26.49% 18.00% 60.50% 47.57% -8.07%
25.13% 19.00% 58.27% 42.83% -1.10%
24.07% 20.00% 56.04% 38.10% 5.86%
23.35% 21.00% 53.82% 33.36% 12.82%
22.99% 22.00% 51.59% 28.62% 19.79% no short selling
23.00% 22.90% 49.60% 24.33% 26.07%
24.00% 24.77% 45.38% 15.51% 39.11%
25.00% 25.75% 43.23% 10.90% 45.87%
26.00% 26.52% 41.58% 7.17% 51.25%
27.00% 27.19% 40.11% 3.97% 55.92%
28.00% 27.80% 38.70% 1.12% 60.17%
29.00% 28.37% 37.53% -1.63% 64.10%
30.00% 28.90% 36.28% -4.11% 67.83%
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results
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results
0.79019019
6.00%
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results
104.00% 88.18%
108.00% 91.34%
112.00% 94.50%
116.00% 97.66%
120.00% 100.82%
124.00% 103.98%
128.00% 107.14%
132.00% 110.31%
136.00% 113.47%
140.00% 116.63%
144.00% 119.79%
148.00% 122.95%
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graphs
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graphs
assets
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graphs
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