PortfolioUtils (NMDEV 1.2.9 API)

java.lang.Object
- tech.nmfin.portfoliooptimization.PortfolioUtils

public class PortfolioUtils
extends Object

Portfolio quantities and units

These methods evaluate supplied weights; they do not normalize or optimize them. Asset order and dimensions must agree. Returns and covariance must use the same horizon and units. Variance is in squared-return units; its square root is volatility. Scaling weights also scales exposure and risk, so a sum-to-one check belongs in the calling portfolio workflow.

Evaluate weights independently

For two uncorrelated assets, portfolio variance is the sum of squared weights times individual variances.


 import dev.nm.algebra.linear.matrix.doubles.matrixtype.dense.DenseMatrix;
 import dev.nm.algebra.linear.vector.doubles.dense.DenseVector;
 import tech.nmfin.portfoliooptimization.PortfolioUtils;
 DenseVector weights = new DenseVector(0.6, 0.4);
 DenseVector expectedReturns = new DenseVector(0.05, 0.10);
 DenseMatrix covariance = new DenseMatrix(new double[][]{{0.04, 0}, {0, 0.09}});
 double expectedReturn = PortfolioUtils.getPortfolioReturns(weights, expectedReturns);
 double variance = PortfolioUtils.getPortfolioVariance(weights, covariance);
 assert Math.abs(expectedReturn - 0.07) < 1e-12;
 assert Math.abs(variance - 0.0288) < 1e-12;
 assert Math.abs(Math.sqrt(variance) - 0.1697056274847714) < 1e-12;

Method Summary

All Methods Static Methods Concrete Methods
Modifier and Type	Method and Description
`static double`	`getPortfolioReturns(Vector weights, Vector mu)` Computes the expected portfolio return.
`static double`	`getPortfolioVariance(Vector weights, Matrix sigma)` Computes the portfolio variance.
`static double`	`getSharpeRatio(Vector weights, Vector mu, Matrix sigma, double benchmarkRate)` Computes the portfolio Sharpe ratio.

Methods inherited from class java.lang.Object
clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

Method Detail

getPortfolioReturns
```
public static double getPortfolioReturns(Vector weights,
                                         Vector mu)
```
Computes the expected portfolio return.

Parameters:

weights - the weights of assets

mu - the expected returns of assets

Returns:

the expected portfolio return

getPortfolioVariance

public static double getPortfolioVariance(Vector weights,
                                          Matrix sigma)

Computes the portfolio variance.

Parameters:: weights - the weights of assets; sigma - the covariances of assets
Returns:: the portfolio variance

getSharpeRatio

public static double getSharpeRatio(Vector weights,
                                    Vector mu,
                                    Matrix sigma,
                                    double benchmarkRate)

Computes the portfolio Sharpe ratio.

Parameters:: weights - the weights of assets; mu - the expected returns of assets; sigma - the covariances of assets; benchmarkRate - the risk free/benchmark rate
Returns:: the portfolio Sharpe ratio

Class PortfolioUtils