Portfolio Construction Based on the Modern Portfolio Theory Including Gold, Crude Oil and Cryptocurrency

Abstract

Finding and optimizing the best investment strategies is one of the most important skills in financial markets. However, the research on the construction of different types of investment portfolios including stocks, goods, and cryptocurrency is not perfect enough. This article constructs an optimal portfolio utilized Modern Portfolio Theory and Sharpe ratio. Based on the price data of two stocks in China Securities Index 300, three stocks in Standard and Poor's 500, Gold, Crude Oil and Bitcoin, the portfolio of 8 kinds of price data are simulated and calculated. A variety of optimal investment portfolios have been constructed, including the minimum risk investment portfolio and the highest Sharpe ratio investment portfolio. In addition, by setting the lower limit of the expected rate of return, the lowest-risk investment portfolio with customized expected rate of returns is obtained. Nevertheless, an attempt was made in the article to construct investment strategies for different types of investment projects. These results shed light on guiding further exploration of portfolio construction with different type of stock or goods.