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!
This exercise is part of the course
Introduction to Portfolio Analysis in Python
Hands-on interactive exercise
Have a go at this exercise by completing this sample code.
# Define the efficient frontier
ef = ____(____, ____)