Optimal Portfolios by Risk Level
The table below shows sample optimal portfolios at different risk levels, constructed using one-year historical data and blended return forecasts. Actual optimal portfolios constantly change. Blended return forecasts combine the forecast generated by the machine learning forecasting model with the historical average return for each asset class.
Each column of the table shows the portfolio with the highest expected return for a targeted level of risk.
SD (ret) shows the targeted annualized standard deviation of portfolio returns.
TRisk shows the portfolio tail risk conditional on a 1 in 20 negative S&P 500 return outcome.
Notice that as portfolio risk drops, portfolios load more on bonds and less on stocks.
Also, the expected return of portfolios typically drops as targeted risk level falls.
VOL_0.08 | VOL_0.09 | VOL_0.1 | VOL_0.11 | VOL_0.12 | VOL_0.13 | VOL_0.14 | VOL_0.15 | VOL_0.16 | VOL_0.17 | |
SD (ret) | 0.080 | 0.090 | 0.100 | 0.110 | 0.120 | 0.130 | 0.132 | 0.132 | 0.132 | 0.132 |
TRisk | -0.259 | -0.277 | -0.296 | -0.315 | -0.333 | -0.350 | -0.347 | -0.347 | -0.347 | -0.347 |
USIG | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |
MXWOU | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |
M3CN | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | -0.000 | -0.000 | -0.000 | -0.000 | -0.000 |
USHY | 0.450 | 0.371 | 0.274 | 0.180 | 0.088 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |
VAL | 0.178 | 0.200 | 0.200 | 0.200 | 0.200 | 0.200 | 0.200 | 0.200 | 0.200 | 0.200 |
WIN | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |
MXEF | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |
SPX | 0.297 | 0.354 | 0.451 | 0.545 | 0.637 | 0.739 | 0.800 | 0.800 | 0.800 | 0.800 |
REIT | 0.075 | 0.075 | 0.075 | 0.075 | 0.075 | 0.061 | 0.000 | 0.000 | 0.000 | 0.000 |
USTREAS | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | -0.000 | -0.000 | -0.000 | -0.000 |
Disclaimer: The actual portfolio will differ from these examples. These portfolios are shown only for illustrative purposes.