This is an example of the use of @RISK automation applied to stock portfolio optimization. It is a custom application written by Lumivero Custom Development using @RISK’s XDK in Excel.
The steps outlined in the Stock Portfolio Optimization example include:
- Obtain Price & Weight Data
The user will first define a portfolio of stocks.
- Run Analysis & Review
The next step is to run the analysis for the returns of each security.
- Fit Data & Simulate
The third step is to obtain the distributions that fit the historical return of the portfolio. Distributions of 10 will be used as a base for predicting gains or losses using a simulation.
- Optimize & Generate Efficient Frontier
The last step is to run the optimization process and maximize the portfolio's mean return, given certain constraints. Another feature available is to get the Efficient Frontier of the portfolio.
Automation takes the shape of an Excel add-in, which is shown to the user as a new Excel ribbon.
@RISK has written applications for cost estimation, retirement planning, oil and gas prospecting, portfolio risk management, and more – all utilizing @RISK technology in Excel. In each case, the interface is customized to include only what the users need, hiding unused @RISK functionality and preventing user access to the underlying model logic. You can also automate processes like reporting, generating only the charts and data you want. The result is a tailored application ready to roll out to your workgroup. Because the application is in Excel, the training required for users is minimal.