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Exercise

Portfolio optimization: Max Sharpe

In this exercise, you're going to calculate the portfolio that gives the Maximum Sharpe ratio. Often, this is the portfolio the investor wants to invest in, as it provides the highest possible return to risk ratio.PyPortfolioOpt makes it very easy to calculate this portfolio from a set of historical price data.

Available for you are the mean historic return for a small portfolio of stocks under mu and a covariance matrix belonging to our portfolio under Sigma. You'll need these as inputs to calculate the Efficient Frontier and Maximum Sharpe portfolio. Let's try it!

Instructions 1/3
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  • Use the console to print the expected returns mu and covariance matrix Sigma to make sure you know what the inputs look like. Then, define the efficient frontier using mu, and Sigma in the script.
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