Find the optimal asset allocation. Adjust the ratio of each asset class and visually check the balance of risk and return.
Current Portfolio:
Risk: 8.37% /Return: 6.25%
6.25%
Annualized
8.37%
Annualized
0.74
Risk-free rate 0.1%
Asset Class | Allocation Ratio | Risk Contribution |
---|---|---|
US Stocks | 50.0% | 75.0% |
US Bonds | 50.0% | 25.0% |
Portfolio Expected Return: A weighted average of each asset's expected return multiplied by its allocation ratio.E(Rp) = Σ wi × E(Ri)
where, wi is the allocation ratio of asset i, E(Ri) is the expected return of asset i.
Portfolio Risk (Standard Deviation): The square root of the variance considering correlations between assets.σp = √(Σ Σ wi × wj × σi × σj × ρij)
where, wi is the allocation ratio of asset i, σi and σj is the correlation coefficient between assets.
Sharpe Ratio: The excess return over the risk-free rate, divided by risk.Sp = [E(Rp) - Rf] / σp
where, E(Rp) is the portfolio's expected return, Rf is the risk-free rate (0.1% in this app), σp is the portfolio's risk.