Risk and Return Tradeoff Memo-Fin402
Risk and Return Tradeoff Memo-Fin402Risk and Return Tradeoff Memo
The construction portfolio process concludes to be very complex. Statistical past performance, industry knowledge, future potential and relying on insights that are personal are typically what analysts rely on within the market in order to arrive at the final list. Maximizing returns while minimizing risk is the goal every investor aims for. An evaluation of individual securities as well as risk return trade off within isolation and the risk return trade off contribution of the entire portfolio. The managing and constructing of a portfolio simulation outlining the fundamentals within the construction of the portfolio in regards to the risk return trade off as well as the relationship among investment performance and strategy will be the structure of this memo. Casa Bonita Ceramics has selected me as the treasury analyst to determine the best stocks and allocate company resources in order to construct a successful portfolio. My decision will be detailed within this memo of the simulation, communicate the Sharpe ratio in the relation it has to investment decision as well as give recommendations for organization changes in the investment strategy to improve the investment performance.
Given the excess cash generated in the previous year, Casa Bonita is considering the invest $800,000 in the stock market. Eight stocks have already been chosen. Given the high return consideration without the risk of capital loss in sight, narrowing down to four final stocks worth the investment would be beneficial. The four stocks chosen are Levinthal Defense Systems, Goldstein and Delaney Bank, Transconduit, Inc., and Desktop, Inc. The selection of stock was astute and provided wise judgment in stock selection diversity in order to reduce stock specific risks.
The $800,000 was the next step in allocating out in a maximized manner to the portfolio return while keeping the risk of the portfolio below 22%. A selection to distribute...