RoboAdvisor: High-Risk Portfolio Optimizer

This RoboAdvisor application constructs a portfolio of 12 high-risk stocks by maximizing portfolio risk (standard deviation) and correlation. It emphasizes concentrated, undiversified investments by heavily weighting the riskiest stocks.

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📊 Key Features

• Stock Filtering: Filters stocks by:

  • Trading volume (≥ 200,000)
  • Currency (USD)
  • Minimum trading days (20 days/month)

• Portfolio Construction:

  • Selects 12 stocks with the highest correlation.
  • Prioritizes riskier stocks by assigning higher weights.

• Custom Correlation: Implements a tailored Pearson’s correlation formula for multivariable evaluation.

• Risk Optimization:

  • Maximizes portfolio standard deviation for higher risk exposure.
  • Assigns weights between 4.17% and 25% for each stock.

• Visualization: Graphs portfolio performance and compares equal-weighted vs optimized portfolios.

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🛠 Methodology

1. Stock Filtering

• Input a CSV file of tickers (Tickers-Copy1.csv).
• Ensure valid stocks meet these criteria:
  • Traded in USD.
  • Monthly average volume ≥ 200,000.
  • Minimum 20 trading days per month.

2. Portfolio Construction

• Start with the two most correlated stocks.
• Iteratively add the next most correlated stock until the portfolio contains 12 stocks.

3. Weight Optimization

• Heavily weight stocks with higher standard deviations.
• Maintain weights between 4.17% and 25%.

4. Risk Analysis

• Calculate portfolio standard deviation and correlation.
• Display portfolio performance over time.

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📈 Usage

1. Prepare Your Input:
   • Place the CSV file of tickers in the project directory (Tickers-Copy1.csv).
2. Run the Script:
   • Execute the Python script to filter stocks, build the portfolio, and calculate optimal weights.
3. Outputs:
   • Final portfolio of 12 stocks with weights and expected values.
   • Graph of portfolio performance over time.

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⚡ Visualization Example

The script generates a graph comparing equal-weighted and optimized portfolios, emphasizing the differences in performance and risk.

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🎯 Motivation

Standard deviation is a key measure of risk, reflecting the volatility of stock prices. This RoboAdvisor focuses on maximizing standard deviation and correlation, creating a high-risk, high-reward portfolio that benefits from repeated price patterns.

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