Efficient Frontier Table

The Efficient frontier refers to the curve which reflects the most favourable combination of a portfolio of assets to achieve given levels of return, with the lowest amount of risk.

To calculate this we use a system called Mean-Variance Optimisation (MVO), where the inputs are:

• The expected return of each instrument
• The standard deviation of each instrument
• The correlation between the instruments

The Efficient frontier section on the main screen requires you to select a portfolio, or the current active list, against which the calculations will be performed and confirm the risk free rate to be applied, before clicking the Go button.

At present there is a limit of 15 components that can be simultaneously calculated (but only for the purposes of this function). Once you have viewed the results, you can apply constraints to the minimum (Lower Bound) and maximum (Upper Bound) percentage of any given item in the portfolio.

The table shows the efficient mix of the selected components at different levels of risk (i.e. as one moves along the efficient frontier).

The chart shows each of the optimised portfolios. If you click on any of the risk level numbers themselves, only that risk level will be shown on the chart.

Once the first calculation has been performed, you can constrain any of the components in the table at the top of the page and press "Go" to recalculate. You can also alter the 10 levels of risk manually to suit your needs.