Group Project The Role Commodities Play in Equity Portfolios

You work as an investment analyst in AI Capital equity portfolio. The mandate of this portfolio is to invest in global equities. Your manager read an article about the value of commodities in equity portfolios and he has asked you to investigate how commodities may contributes to the risk and returns of the AI fund. You believe that diversifying to precious metals, oil, agricultural and industrial commodities may all enhance the risk and return of equity portfolios, but you are not sure if it applies to AI holdings. Hence, before recommending investing in commodities, you would like to carry out analysis on how commodities contributed to the risk return tradeoff of AI equity portfolio.

You are required to do the following:

1. Collect monthly historical prices of Gold as well as four Equity Indices of your choice. (Go back up to 5-10 years)

(2 Marks)

2. Describe the statistical properties of the returns. Compute the Sharpe Ratios of all indices assuming 0.1% risk free rate. Investigate the individual investment performance of these indices during your chosen sample period. Depict that performance using graphs.

(3 Marks)

3. Create a sample variance/covariance matrix of equity indices returns excluding Gold.

(1 Mark)

4. Using the solver, find the weights of the minimum variance portfolio and the weights of the portfolio with the maximum returns. Generate nine additional portfolios with returns between that of the minimum variance and the maximum return portfolio.

(2 Marks)

5. Create a chart of the efficient frontier. Add new series that shows the returns and the standard deviations of the individual equity indices.

(1 Mark)

6. Find the weights of the market portfolio. Its returns and standard deviation. Add the capital market line to your chart.

(1 Mark)

7. Now, repeat 3,4 & 5 & 6 by adding the commodity of your choice to the analysis.

(4 Marks)

8. Write a recommendation regarding the commodity allocation of AI equity portfolio. Link your finding to some of the international literature on the contribution of commodities to equity portfolios.

Group Project - The Role Commodities Play in Equity Portfolios You work as an investment analyst in Al Capital equity portfolio. The mandate of this portfolio is to invest in global equities. Your manager read an article about the value of commodities in equity portfolios and he has asked you to investigate how commodities may contributes to the risk and returns of the Al fund. You believe that diversifying to precious metals, oil, agricultural and industrial commodities may all enhance the risk and return of equity portfolios, but you are not sure if it applies to Al holdings. Hence, before recommending investing in commodities, you would like to carry out analysis on how commodities contributed to the risk return tradeoff of Al equity portfolio You are required to do the following: 1. Collect monthly historical prices of Gold as well as four Equity Indices of your choice. (Go back up to 5- 10 years) (2 Marks) 2. Describe the statistical properties of the returns. Compute the Sharpe Ratios of all indices assuming 0.1% risk free rate. Investigate the individual investment performance of these indices during your chosen sample period. Depict that performance using graphs. (3 Marks) 3. Create a sample variance/covariance matrix of equity indices retums excluding Gold. (1 Mark) 4. Using the solver, find the weights of the minimum variance portfolio and the weights of the portfolio with the maximum returns. Generate nine additional portfolios with returns between that of the minimum variance and the maximum return portfolio. (2 Marks) 5. Create a chart of the efficient frontier. Add new series that shows the returns and the standard deviations of the individual equity indices. (1 Mark) 6. Find the weights of the market portfolio. Its returns and standard deviation. Add the capital market line to your chart. (1 Mark) 7. Now, repeat 3,4 & 5 & 6 by adding the commodity of your choice to the analysis. (4 Marks) 8. Write a recommendation regarding the commodity allocation of Al equity portfolio. Link your finding to some of the international literature on the contribution of commodities to equity portfolios. (6 Marks) Group Project - The Role Commodities Play in Equity Portfolios You work as an investment analyst in Al Capital equity portfolio. The mandate of this portfolio is to invest in global equities. Your manager read an article about the value of commodities in equity portfolios and he has asked you to investigate how commodities may contributes to the risk and returns of the Al fund. You believe that diversifying to precious metals, oil, agricultural and industrial commodities may all enhance the risk and return of equity portfolios, but you are not sure if it applies to Al holdings. Hence, before recommending investing in commodities, you would like to carry out analysis on how commodities contributed to the risk return tradeoff of Al equity portfolio You are required to do the following: 1. Collect monthly historical prices of Gold as well as four Equity Indices of your choice. (Go back up to 5- 10 years) (2 Marks) 2. Describe the statistical properties of the returns. Compute the Sharpe Ratios of all indices assuming 0.1% risk free rate. Investigate the individual investment performance of these indices during your chosen sample period. Depict that performance using graphs. (3 Marks) 3. Create a sample variance/covariance matrix of equity indices retums excluding Gold. (1 Mark) 4. Using the solver, find the weights of the minimum variance portfolio and the weights of the portfolio with the maximum returns. Generate nine additional portfolios with returns between that of the minimum variance and the maximum return portfolio. (2 Marks) 5. Create a chart of the efficient frontier. Add new series that shows the returns and the standard deviations of the individual equity indices. (1 Mark) 6. Find the weights of the market portfolio. Its returns and standard deviation. Add the capital market line to your chart. (1 Mark) 7. Now, repeat 3,4 & 5 & 6 by adding the commodity of your choice to the analysis. (4 Marks) 8. Write a recommendation regarding the commodity allocation of Al equity portfolio. Link your finding to some of the international literature on the contribution of commodities to equity portfolios. (6 Marks)