Welcome to Portfolio Analysis!

Introduction to Portfolio Analysis in Python

Charlotte Werger

Data Scientist

Hi! My name is Charlotte

Charlotte Werger

Introduction to Portfolio Analysis in Python

What is a portfolio

A portfolio of five US stocks

Introduction to Portfolio Analysis in Python

Why do we need portfolio analysis

Charts related to portfolio analysis

Introduction to Portfolio Analysis in Python

Portfolio versus fund versus index

  • Portfolio: a collection of investments (stocks, bonds, commodities, other funds) often owned by an individual

  • Fund: a pool of investments that is managed by a professional fund manager. Individual investors buy "units" of the fund and the manager invests the money

  • Index: A smaller sample of the market that is representative of the whole, e.g. S&P500, Nasdaq, Russell 2000, MSCI World Index

Introduction to Portfolio Analysis in Python

Active versus passive investing

  • Passive investing: following a benchmark as closely as possible
  • Active investing: taking active "bets" that are different from a benchmark
  • Long only strategies: small deviations from a benchmark
  • Hedgefunds: no benchmark but 'total return strategies'

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Active versus passive investor

Introduction to Portfolio Analysis in Python

Diversification

  1. Single stock investments expose you to: a sudden change in management, disappointing financial performance, weak economy, an industry slump, etc
  2. Good diversification means combining stocks that are different: risk, cyclical, counter-cyclical, industry, country

Diversifying eggs across three baskets

Introduction to Portfolio Analysis in Python

Typical portfolio strategies

  • Equal weighted portfolios
  • Market-cap weighted portfolios
  • Risk-return optimized portfolios

Equal Weighted and Market Cap Weighted portfolio weights

Introduction to Portfolio Analysis in Python

Let's practice!

Introduction to Portfolio Analysis in Python

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