Consider a portfolio of $1 million invested as follows: 20% in Netflix, 20% in Microsoft and 60% in JP Morgan. Use Refinitiv to obtain the daily prices of the stocks contained in the portfolio over the last 2 years (prior to April 1st 2021). Using these data together with the S&P 500 and T-Bill 3M when needed, please compute:

a. The correlation matrix of the three stock prices. Comment on your results.

b. The following analytics: annual average return, annual volatility, Sharpe ratio, annual excess return over the S&P 500, tracking error with respect to the S&P 500 and information ratio with respect again to the S&P 500. Comment on your results.

 

The portfolio manager wants to implement a minimum variance portfolio instead.

c. How should he rebalance the portfolio on April 1st 2021 using the last two years of daily data?