Your Equity portfolio you can control returns and risk- part 11

Hello Folks,
Sharing the trick of the trade, but everything cannot be done manually need powerful analytical tools. For risk computation I have used tool.
Let me begin with an example- I take 3 large caps ACC, Axis Bank and Apollo hospital (Neither I recommend nor reject these scrips, I take this as example for illustration purpose only)
What I have is, I have last 3 years monthly closing price data, I have found the difference between closing price of successive month and found the return. But I need to convert this return in into 1 Rupee invested, how much return I am getting . Hence what I have is delta=(P2-P1)/P1 for 36 months. Average return=sum(delta)/36, standard deviation (risk)= standard-deviation of sample ( delta)

Here is my data in excel for all the 3 scrips-

Now what I do is I change the weights from 0.6,0.25,0.15 to 0.4,0.3,0.3 see how return/month has increased as well as risk has reduced!
One need to know We can vary these returns for these scrips between range (0.5 to 1.6%- expected return).

But risk also varies, Same returns can be obtained in more than one ways, but only one of them will have least risk. That is what user should discover.

Combined standard deviation or risk is based on 2 things- scrips can also have covariance, it means their risk is not independent, the risk of one scrip is related to price of another scrip, some scrips rise and fall together, some are opposite-means if one rises the other falls. This relationship we need to know.

Hence, I used a web-based tool to compute weights with minimum risk by using this tool – see the report attached.
This tool also has advanced option – in screen 2-to vary return to max, min or average and then generate the report. I use it for my portfolio results are quite impressive!
SAMPLE REPORT.pdf (99.7 KB)
See the optimized scrip has slightly lower return-in this case- But still if this is my scrip, I still would go with optimized scrip as it reduces my risk. During correction or downfall every % reduction in risk helps in resisting fall.