100 Level

Correlations Are Impacted By Weight Assigned To Securities

Photograph: Garden train layout designed by Tom Bishop of Denver, CO. The following two asset allocation plans are only presented to illustrate the fact that correlations between securities, when combined in a portfolio, will vary when the weight is changed.  In the first portfolio, equal weights (10%) are assigned to each ETF, and the following table shows the correlation matrix.  Pay attention … [Read More...]

Stock Market Value vs. GNP

Are stocks priced fairly? Check out Warren Buffett's stock market value vs. GNP at this site. Once on the site, click on this link to see the graph. While stocks are not overly cheap, the market, according to this theory is priced about where it was back in 1971. … [Read More...]

300 Level

Optimized Portfolio Using Core ETFs

As mentioned in the last post, I'm working on an optimization worksheet that connects directly with Quantext Portfolio Planner (QPP).  The following analysis is the result of optimizing the Return/Risk to its maximum setting using the array of ETFs shown below.  As one might expect, forcing the Return/Risk ratio to its maximum setting vs. a more modest 0.60 results in a concentration of the … [Read More...]

In Search of the “Holy Grail” Portfolio Asset Allocation

Searching for that idea asset allocation is a never ending challenge. Particularly if one does not want an overly complicated portfolio. Below is a slight variation of a Strategic Asset Allocation plan laid out earlier this week. While the projected return meets the goal of exceeding the projected return for the S&P 500 by more than 100 basis points (1.0%), the projected uncertainty is a … [Read More...]

200 Level

Value Oriented Portfolio

Last evening a value oriented portfolio was mailed to me so I thought I would run it through a Quantext Portfolio Planner analysis.  Unfortunately, three of the thirteen ETFs have "short records."  This simply means the data does not extend back a minimum of three years. The ETFs with limited data are: MGV, VXUS, and VSS.  Nevertheless, here are the results. To view this … [Read More...]

“New Normal” Portfolio With Risk Reduction Allocation Plan

Following up on the risk adjusted Ten ETF Portfolio analyzed yesterday, what does the "New Normal" group of stocks and ETFs look like when the same risk management algorithm is applied.  In this analysis I was able to stretch the historical period out over five-years.  The percentage allocated to the different stocks and ETFs look reasonable when the low variance BND ETF is not … [Read More...]

400 Level

Delta Factor and Stocks of Interest

Out of curiosity, I wanted to see what the "Delta Factor" would tell us for a group of stocks that show up with a "Buy" signal on my Watch List or 150 stocks.  Without a lot of comment, below is a list of stocks that are priced for purchase based on the pricing models I use within the Watch List.  Extracting only those stocks, I ran them through the "Delta … [Read More...]

Modified Sortino Ratio and Retirement Ratio: A Review of Uncertainty Measurements

  While the Sortino ratio was an improvement versus the old methods for measuring portfolio performance against a standard, Retirement Ratio sets even a high performance bar.  The old Sortino Ratio looked like the following. S = (P - B)/DR where S = Sortino Ratio P = IRR for Portfolio B = IRR for Benchmark (we now use the customized ITA Index in our calculations) DR = Downside risk … [Read More...]