Sharpe Ratio Optimisation
This project focuses on building an optimized multi-asset portfolio using principles of Modern Portfolio Theory to maximize risk-adjusted returns.
Eight equity funds across diversified strategies including mid-cap, small-cap, contrarian, dividend, value, and special situations were analyzed using historical return data and covariance matrices.
Portfolio weights were optimized using Excel Solver to maximize the Sharpe Ratio. The optimized portfolio achieved a Sharpe Ratio of 1.73, significantly outperforming the S&P 500 benchmark Sharpe Ratio of 0.98.
The project demonstrates practical applications of diversification, portfolio variance minimization, and disciplined risk management through systematic asset allocation.
Project Highlights
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Objective
To construct a multi-asset portfolio that maximizes risk-adjusted returns using the Sharpe Ratio as the optimization metric.
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Methodology
Historical return analysis, covariance estimation, and Excel Solver– based optimization under realistic constraints.
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Outcome
Achieved superior diversification benefits and improved risk-adjusted performance compared to benchmark indices.
Portfolio Optimisation Model (Excel)
The Excel model below shows the return calculations, covariance matrix, optimized portfolio weights, and Sharpe Ratio computation used in this project.