Finance Toys


Portfolio analysis

In this section you can find different programmes on portfolio analysis.

Please also check our mobile apps “Financial analysis with examples” and “All financial formulas” (links on the right) which may be useful for your learning process or your work


Markowitz portfolio

This is a model of Markowitz efficient portfolio constuction with Huang Litzenberger approach in excel.

The idea of the model is simple: you can find the portfolio with the lowest risk at a given expected return.

Usually you can solve portfolio optimization task using Solver in excel. But in this case you only enter parameters and get the answer. Huang Litzenberger approach allows you to see the calculation. Furthermore you can create a live model in which you’ll be able to change expected return and get efficient portfolio with a minimum risk for that level of return.

We also construct the efficient frontier in this model


Portfolio analysis

Breaking down a stock portfolio involves analyzing and categorizing the various stocks held within the portfolio based on certain criteria. Here’s a step-by-step guide on how to break down a stock portfolio:

  1. Review Your Holdings: Start by reviewing all the stocks in your portfolio. Make a list of the individual stocks and their respective quantities.

  2. Categorize by Sector/Industry: Categorize the stocks based on the sectors or industries they belong to. For example, you may have stocks in sectors such as technology, healthcare, finance, consumer goods, etc. This breakdown helps you understand the diversification or concentration of your investments across different sectors.

  3. Analyze Market Capitalization: Group the stocks based on their market capitalization. Market capitalization refers to the total value of a company’s outstanding shares. You can categorize stocks as large-cap, mid-cap, or small-cap based on their market capitalization. This breakdown helps you assess the risk and growth potential associated with different market capitalization segments.

  4. Assess Geographical Exposure: Consider the geographical exposure of your portfolio. Determine the countries or regions where the companies in your portfolio operate. You can categorize stocks based on their geographical exposure, such as domestic (local) stocks, international stocks, or stocks from specific regions like North America, Europe, Asia, etc. This breakdown helps you understand your exposure to different economies and market dynamics.

  5. Evaluate Risk Profile: Assess the risk profile of your portfolio by categorizing stocks based on their risk characteristics. This can include categorizing stocks as high-risk, moderate-risk, or low-risk based on factors such as volatility, beta, and industry-specific risks. This breakdown helps you evaluate the overall riskiness of your portfolio and identify potential areas of concern.

  6. Consider Investment Strategy: Categorize stocks based on your investment strategy or style. For example, you may have growth stocks, value stocks, dividend-paying stocks, or a mix of different investment styles. This breakdown helps you understand the underlying investment philosophy guiding your portfolio construction.

  7. Calculate Allocation Percentages: Calculate the percentage allocation of each stock category within your portfolio. This will give you a visual representation of the relative importance of each category in your overall portfolio.

  8. Regularly Review and Rebalance: Portfolio breakdown is not a one-time activity. It’s important to regularly review your portfolio, assess the performance of individual stocks and categories, and rebalance if necessary. Rebalancing involves adjusting your holdings to maintain your desired allocation percentages or to reflect changes in your investment goals or market conditions.

Remember, breaking down a stock portfolio is a personal exercise, and the specific breakdown criteria may vary based on individual preferences, investment goals, and risk tolerance. It’s also recommended to consult with a financial advisor or investment professional to ensure your portfolio aligns with your objectives and risk profile.