Comparative Analysis of Optimal Investment Strategies Based On 6 Stocks

College of Foreign Language, Nankai University, Tianjin, China

^* Corresponding author: 2213998@mail.nankai.edu.cn

Abstract

In the world of financial management, constructing an effective investment portfolio is a key task for investors. An optimal portfolio allows investors to achieve their financial goals while managing potential risks in a dynamic and uncertain market environment. It is acknowledged that one foundational principle in portfolio construction is risk diversification. In portfolio construction, two popular methods for optimizing investment decisions are the minimal volatility portfolio and the maximum Sharpe ratio portfolio. This research collects historical stock data from Nasdaq to evaluate the effectiveness of these two portfolio strategies. By applying the Mean-Variance Model to six representative stocks across different sectors, this study aims to determine which strategy performs superior cumulative returns. Results show that the minimal volatility portfolio achieved a relatively higher cumulative return, outperforming the maximum Sharpe ratio strategy and the market index. This study provides important insights for risk-averse investors looking for steady returns by highlighting the benefit of a lower-risk portfolio in producing better cumulative returns.