Our Portfolio Optimization Models

Max Sharpe Ratio Portfolio

The maximum Sharpe ratio portfolio, also known as the tangency portfolio, is designed to provide the highest possible return per unit of risk by maximizing the Sharpe ratio. This strategy uses historical returns and asset correlations to determine the optimal allocation that balances expected return against volatility. It is commonly used by professional investors who seek to optimize performance while maintaining efficient risk management. The portfolio assumes the presence of a risk-free asset and aims to find the portfolio that lies tangent to the efficient frontier, offering the most favorable trade-off between risk and return.

Minimum Volatility Portfolio

The minimum volatility portfolio, or minimum variance portfolio, focuses on minimizing overall portfolio volatility regardless of the expected returns. It allocates investments in a way that reduces the total fluctuation in portfolio value over time, often favoring assets that have low correlation with one another. This approach is suitable for investors who are highly risk-averse and prioritize capital preservation over aggressive growth. It is especially useful during periods of market stress or uncertainty, as it aims to provide more stable performance with reduced drawdowns.

Line graph showing three stock market indices over time from February to June. The Indices are Equal Weight, Max Sharpe (Weekly), and Min Vol (Weekly). Equal Weight shows significant growth, Max Sharpe fluctuates, and Min Vol remains relatively stabl
Line graph showing the effect of weight on satellite signal strength from February to June with three variables: Equal Weight, Max Sharpe (Weekly), and Min Vol (Weekly). Equal Weight remains constant, Max Sharpe increases significantly over time, and
Line chart showing three data trends over time from February to June: Equal Weight, Max Sharpe (Weekly), and Min Vol (Weekly). The Max Sharpe line displays a significant upward trend, peaking around June. The Equal Weight and Min Vol lines remain rel
Line graph displaying data from April 16 to May 10, showing three lines representing 'Equal Weight', 'Max Sharpe (Weekly)', and 'Min Vol (Weekly)'. The lines fluctuate over time, with the 'Max Sharpe (Weekly)' line generally trending upwards, 'Equal
Line chart comparing Equal Weight, Max Sharpe, and Min Vol weekly values from February to June, with notable peaks for Max Sharpe around June.
A line graph showing three data series over time from February to June. The blue line represents 'Equal Weight,' which increases significantly toward June. The dark blue line indicates 'Max Sharpe (Weekly)' with fluctuations close to 1,000, remaining
Line graph showing equity weight, maximum Sharpe ratio, and minimum volatility over time from February to June, with the blue line (equity weight) increasing significantly, peaking around the latest date, while the red and pink lines remain relativel
Line graph showing the performance of three metrics over time from February to June, with the metrics labeled as Equal Weight, Max Sharpe (Weekly), and Min Vol (Weekly).