Portfolio Manager

Software for Application of Markowitz’s Modern Portfolio Theory

Portfolio Manager – Software for Application of Markowitz’s Modern Portfolio Theory

About Application

The Portfolio Manager web application leverages proven Markowitz’s Modern Portfolio Theory to provide you with professional-level portfolio management skills.

What are the benefits for you?

Use Nobel award-winning theory to manage your portfolio

Is your portfolio really well collected? Compare it with the efficient frontier. With our application you can easily determine whether your portfolio is well-balanced and if rebalancing could increase returns or decrease risk.

Apply specific limits and find the optimal solution

Application provides you with the ability to set specific limitations such as minimum or maximum weight for stocks in the portfolio, presence of arbitrary stock, or the maximum number of companies included in the portfolio.
How to use it?

We assume you already have a portfolio (but it is optional). If so, the fundamental use case is the following, and it only takes a few seconds:

4 Steps

Submit your positions easily
Check your risk-performance metrics on graphs and charts
Compare your current portfolio with efficient ones (on efficient frontier)
Choose a new portfolio collection by your risk-aversion profile

According to Markowitz’s Modern Portfolio Theory we take your portfolio and calculate risk-performance metrics. Expected return, volatility, Sharpe ratio, and value at risk. Let’s have an example of a portfolio (equally weighted FAANG).
Then let’s analyze your portfolio against efficient frontier. One important thing should be mentioned in this place: efficient frontier is calculated from a specific pool; in this case, it is companies involved in S&P 100 index. If you would like to use only FAANG stocks, you can specify your own pool.
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The efficient return and volatility (riskiness) of your portfolio determine a location in a graph, based on Markowiz’s model.
The blue point shows the location of your portfolio, and the x-y coordinates represent the risk and reward of that portfolio.
A curve in the plot is an efficient frontier that is created by points representing the set of optimal portfolios sorted by investment risk aversion – the short end starts with a minimal volatility portfolio, and the continuum goes to the right, ending up in the portfolio with the highest return.
You can choose an arbitrary point lying on the curve, and then detailed information is revealed. In line with Harry Makowitz’s theory.
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How do we translate into practice Markowitz’s Modern Portfolio Theory?
Basically, we apply portfolio optimization methods on the whole pool of stocks (S&P 100 in this case) and compare its risk-performance metrics against your custom portfolio.Our clear visualizations, in the form of graphs and charts, make it easy for you to understand and track your portfolio's risk-performance metrics. An efficient frontier is a set of optimal portfolios for a specific level of risk.
The intuition behind the efficient frontier says that there are a set of portfolios with the highest possible return at a given level of risk or the other way around; there are a set of portfolios with the lowest risk (volatility) at a given level of return. Both are valid for a specific level of risk aversion, i.e., investors' willingness to take a higher risk for a higher return.
Want to find out more about Portfolio Manager? Get in touch.

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