Last week I published two portfolios that included the private equity ETF, PSP. Here are links to the first and the second portfolios. In the following portfolio, the allocation to PAAIX is moved up to 24% in hopes of pulling down portfolio volatility. The assumptions in this analysis are identical to the previous two portfolios. I did include last Friday's data in this Quantext Portfolio Planner (QPP) analysis.
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The first screen shot shows the makeup of the portfolio. The projected return over the next six to twelve months is 7.14% or slightly above the 7.0% projected for the S&P 500. The projected standard deviation comes is 14.7% or below our goal of 15%. However, the Return/Risk ratio at 0.49 is well below the goal of 0.60.
The Diversification Metric at 22% is well below the goal of 40%. This is not unexpected due to all the highly correlated ETFs (see table below). Over the nearly five years of operation, this portfolio generated a respectable 4.0% yield. This is higher than most portfolios tracked here at ITA.
Correlation Matrix: As in the prior two portfolios, we pick up lower correlated holdings through bonds (BND & PCY) and commodities (DBC). ETFs with a value of 80% or higher (yellow background) are deemed to be highly correlated.
Delta Factor: Looking out over the next six to nine month, the ETF with the highest probability of returning a reasonable rate of growth is PSP, the private equity holding. VEA, VWO, and DBC are next in line to add value to the portfolio.