Efficient Frontier Forecast

Efficient Frontier Overview

This tool uses mean-variance optimization to generate forward-looking efficient frontiers based on user-specified expected annual return and volatility of assets combined with historical asset correlations.

The required inputs for the efficient frontier include the portfolio assets and expected annual returns, along with volatility expectations when historical volatility is not used. You can optionally specify the asset allocation and allocation constraints for the portfolio assets. If an asset allocation is specified, the provided portfolio will be rendered on the efficient frontier chart.

Efficient Frontier Configuration

Efficient Frontier Assets
Allocation
Expected Return
Volatility
Min. Weight
Max. Weight
Group
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2
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3
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Total
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Asset Groups
Min. Weight
Max. Weight
A
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B
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C
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D
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E
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F
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%

Efficient Frontier Results

Tangency Portfolio

Asset Class Allocation
Global ex-US Stock Market 100.00%
Save portfolio »

Performance Summary

PortfolioExpected ReturnStandard DeviationSharpe Ratio
Tangency Portfolio7.00%17.83%0.11

Efficient Frontier

Notes and Disclosures
  • IMPORTANT: The projections or other information generated by Portfolio Visualizer regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time.
  • The results do not constitute investment advice or recommendation, are provided solely for informational purposes, and are not an offer to buy or sell any securities. All use is subject to terms of service.
  • Investing involves risk, including possible loss of principal. Past performance is not a guarantee of future results.
  • Asset allocation and diversification strategies do not guarantee a profit or protect against a loss.
  • Hypothetical returns do not reflect trading costs, transaction fees, commissions, or actual taxes due on investment returns.
  • The results are based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete.
  • Refer to the related documentation sections for more details on terms and definitions, methodology, and data sources.
  • Portfolio optimization is a process of choosing the proportions of various assets to be held in a portfolio in such a way as to make the portfolio better than any other combination according to the selected objective function such as maximizing risk-adjusted return. Portfolio optimization determines target weights for portfolio assets based on mathematical models that can use either historical or forecasted data as inputs. Optimization results are not guarantees of future performance.
  • The results are based on the total return of assets and assume that all received dividends and distributions are reinvested.
  • Historical asset statistics are based on monthly returns from Jan 1986 to May 2023
  • The efficient frontier is based on the monthly returns, volatilities, and correlations of the specified assets
  • The displayed standard deviation and expected return in the efficient frontier are annualized from the monthly returns
  • Ex-ante Sharpe Ratio for the efficient frontier forecast is calculated using the current 3-month treasury bill return as the risk free rate (4.99% annualized)

Efficient Frontier Assets

#AssetExpected ReturnStandard DeviationSharpe RatioMin. WeightMax. Weight
1US Stock Market6.00%15.58%0.0650.00%100.00%
2Global ex-US Stock Market7.00%17.83%0.1130.00%100.00%
3Short Term Treasury0.22%2.16%-2.2100.00%100.00%
4Intermediate Term Treasury0.80%4.91%-0.8530.00%100.00%
510-year Treasury1.33%7.48%-0.4890.00%100.00%
6Long Term Treasury1.87%10.67%-0.2920.00%100.00%
Results based on the provided capital market expectations. Expected return is the annualized monthly arithmetic mean return. Ex-ante Sharpe Ratio calculated using the current 3-month treasury bill return as the risk-free rate.

Asset Correlations

AssetUS Stock MarketGlobal ex-US Stock MarketShort Term TreasuryIntermediate Term Treasury10-year TreasuryLong Term Treasury
US Stock Market1.000.72-0.05-0.03-0.05-0.04
Global ex-US Stock Market0.721.00-0.02-0.02-0.06-0.04
Short Term Treasury-0.05-0.021.000.910.830.68
Intermediate Term Treasury-0.03-0.020.911.000.970.87
10-year Treasury-0.05-0.060.830.971.000.93
Long Term Treasury-0.04-0.040.680.870.931.00
Based on monthly returns from Jan 1986 to May 2023

Efficient Frontier Portfolios

#US Stock MarketGlobal ex-US Stock MarketShort Term TreasuryIntermediate Term Treasury10-year TreasuryLong Term TreasuryExpected Return *Standard Deviation *Sharpe Ratio *
12.44%0.07%97.50%0.00%0.00%0.00%0.37%2.12%-2.180
22.95%0.62%96.43%0.00%0.00%0.00%0.43%2.13%-2.141
33.47%1.17%95.37%0.00%0.00%0.00%0.50%2.15%-2.090
43.98%1.72%94.30%0.00%0.00%0.00%0.57%2.18%-2.028
54.49%2.27%93.24%0.00%0.00%0.00%0.63%2.23%-1.958
65.01%2.82%92.18%0.00%0.00%0.00%0.70%2.28%-1.880
75.52%3.37%91.11%0.00%0.00%0.00%0.77%2.35%-1.798
86.03%3.92%90.05%0.00%0.00%0.00%0.83%2.43%-1.713
96.55%4.47%88.98%0.00%0.00%0.00%0.90%2.51%-1.628
107.06%5.02%87.92%0.00%0.00%0.00%0.97%2.61%-1.544
117.57%5.57%86.85%0.00%0.00%0.00%1.04%2.71%-1.462
128.09%6.12%85.79%0.00%0.00%0.00%1.10%2.81%-1.382
138.60%6.67%84.73%0.00%0.00%0.00%1.17%2.93%-1.306
149.04%7.14%83.24%0.00%0.00%0.58%1.24%3.04%-1.234
159.46%7.59%81.60%0.00%0.00%1.35%1.30%3.16%-1.166
169.88%8.03%79.97%0.00%0.00%2.12%1.37%3.29%-1.102
1710.29%8.48%78.33%0.00%0.00%2.90%1.44%3.41%-1.042
1810.71%8.92%76.70%0.00%0.00%3.67%1.50%3.54%-0.986
1911.13%9.37%75.06%0.00%0.00%4.44%1.57%3.66%-0.934
2011.54%9.81%73.43%0.00%0.00%5.22%1.64%3.79%-0.884
2111.96%10.26%71.79%0.00%0.00%5.99%1.71%3.92%-0.838
2212.37%10.69%69.67%0.00%1.30%5.98%1.77%4.05%-0.794
2312.77%11.12%67.41%0.00%2.95%5.76%1.84%4.18%-0.753
2413.17%11.55%65.15%0.00%4.60%5.53%1.91%4.32%-0.715
2513.57%11.98%62.89%0.00%6.25%5.31%1.97%4.45%-0.678
2613.97%12.41%60.63%0.00%7.90%5.09%2.04%4.58%-0.644
2714.37%12.84%58.37%0.00%9.55%4.87%2.11%4.71%-0.612
2814.78%13.27%56.11%0.00%11.20%4.64%2.17%4.85%-0.581
2915.18%13.70%53.85%0.00%12.85%4.42%2.24%4.98%-0.552
3015.58%14.13%51.59%0.00%14.50%4.20%2.31%5.12%-0.524
3115.98%14.56%49.33%0.00%16.15%3.98%2.38%5.25%-0.498
3216.38%14.99%47.07%0.00%17.80%3.75%2.44%5.39%-0.473
3316.78%15.42%44.81%0.00%19.45%3.53%2.51%5.52%-0.449
3417.19%15.85%42.55%0.00%21.10%3.31%2.58%5.66%-0.427
3517.59%16.28%40.29%0.00%22.75%3.09%2.64%5.80%-0.405
3617.99%16.71%38.03%0.00%24.40%2.86%2.71%5.93%-0.384
3718.39%17.14%35.78%0.00%26.05%2.64%2.78%6.07%-0.365
3818.79%17.57%33.52%0.00%27.70%2.42%2.84%6.21%-0.346
3919.20%18.00%31.26%0.00%29.35%2.20%2.91%6.34%-0.328
4019.60%18.43%29.00%0.00%31.00%1.97%2.98%6.48%-0.311
4120.00%18.86%26.74%0.00%32.65%1.75%3.05%6.62%-0.294
4220.40%19.29%24.48%0.00%34.30%1.53%3.11%6.76%-0.278
4320.80%19.72%22.22%0.00%35.95%1.31%3.18%6.89%-0.263
4421.20%20.15%19.96%0.00%37.60%1.09%3.25%7.03%-0.248
4521.61%20.58%17.70%0.00%39.25%0.86%3.31%7.17%-0.234
4622.01%21.01%15.44%0.00%40.90%0.64%3.38%7.31%-0.220
4722.41%21.44%13.18%0.00%42.55%0.42%3.45%7.44%-0.207
4822.81%21.87%10.92%0.00%44.20%0.20%3.52%7.58%-0.195
4923.21%22.30%8.68%0.00%45.81%0.00%3.58%7.72%-0.182
5023.61%22.73%6.52%0.00%47.14%0.00%3.65%7.86%-0.171
5124.01%23.16%4.36%0.00%48.46%0.00%3.72%8.00%-0.159
5224.42%23.59%2.21%0.00%49.79%0.00%3.78%8.14%-0.148
5324.82%24.02%0.05%0.00%51.12%0.00%3.85%8.28%-0.138
5425.25%24.66%0.00%0.00%48.29%1.80%3.92%8.42%-0.128
5525.67%25.28%0.00%0.00%44.95%4.10%3.98%8.56%-0.118
5626.10%25.89%0.00%0.00%41.62%6.40%4.05%8.70%-0.108
5726.52%26.50%0.00%0.00%38.28%8.69%4.12%8.85%-0.099
5826.95%27.12%0.00%0.00%34.94%10.99%4.19%9.00%-0.090
5927.37%27.73%0.00%0.00%31.61%13.29%4.25%9.14%-0.081
6027.80%28.34%0.00%0.00%28.27%15.59%4.32%9.30%-0.072
6128.22%28.96%0.00%0.00%24.93%17.89%4.39%9.45%-0.064
6228.65%29.57%0.00%0.00%21.60%20.19%4.45%9.60%-0.056
6329.07%30.18%0.00%0.00%18.26%22.49%4.52%9.76%-0.048
6429.50%30.80%0.00%0.00%14.92%24.79%4.59%9.91%-0.041
6529.92%31.41%0.00%0.00%11.59%27.08%4.65%10.07%-0.033
6630.34%32.02%0.00%0.00%8.25%29.38%4.72%10.23%-0.026
6730.77%32.64%0.00%0.00%4.91%31.68%4.79%10.39%-0.020
6831.19%33.25%0.00%0.00%1.58%33.98%4.86%10.55%-0.013
6931.56%34.09%0.00%0.00%0.00%34.35%4.92%10.71%-0.006
7031.88%35.14%0.00%0.00%0.00%32.98%4.99%10.88%-0.000
7132.20%36.20%0.00%0.00%0.00%31.61%5.06%11.05%0.006
7232.51%37.25%0.00%0.00%0.00%30.24%5.12%11.22%0.012
7332.83%38.30%0.00%0.00%0.00%28.87%5.19%11.40%0.017
7433.15%39.35%0.00%0.00%0.00%27.50%5.26%11.58%0.023
7533.46%40.40%0.00%0.00%0.00%26.14%5.32%11.77%0.028
7633.78%41.45%0.00%0.00%0.00%24.77%5.39%11.96%0.033
7734.10%42.50%0.00%0.00%0.00%23.40%5.46%12.15%0.038
7834.41%43.55%0.00%0.00%0.00%22.03%5.53%12.35%0.043
7934.73%44.60%0.00%0.00%0.00%20.66%5.59%12.55%0.048
8035.05%45.66%0.00%0.00%0.00%19.30%5.66%12.75%0.052
8135.37%46.71%0.00%0.00%0.00%17.93%5.73%12.95%0.057
8235.68%47.76%0.00%0.00%0.00%16.56%5.79%13.16%0.061
8336.00%48.81%0.00%0.00%0.00%15.19%5.86%13.37%0.065
8436.32%49.86%0.00%0.00%0.00%13.82%5.93%13.58%0.069
8536.63%50.91%0.00%0.00%0.00%12.45%5.99%13.79%0.073
8636.95%51.96%0.00%0.00%0.00%11.09%6.06%14.01%0.076
8737.27%53.01%0.00%0.00%0.00%9.72%6.13%14.23%0.080
8837.58%54.07%0.00%0.00%0.00%8.35%6.20%14.45%0.083
8937.90%55.12%0.00%0.00%0.00%6.98%6.26%14.67%0.087
9038.22%56.17%0.00%0.00%0.00%5.61%6.33%14.89%0.090
9138.53%57.22%0.00%0.00%0.00%4.25%6.40%15.11%0.093
9238.85%58.27%0.00%0.00%0.00%2.88%6.46%15.34%0.096
9339.17%59.32%0.00%0.00%0.00%1.51%6.53%15.57%0.099
9439.49%60.37%0.00%0.00%0.00%0.14%6.60%15.80%0.102
9533.51%66.49%0.00%0.00%0.00%0.00%6.66%16.05%0.104
9626.81%73.19%0.00%0.00%0.00%0.00%6.73%16.33%0.107
9720.11%79.89%0.00%0.00%0.00%0.00%6.80%16.66%0.109
9813.40%86.60%0.00%0.00%0.00%0.00%6.87%17.02%0.110
996.70%93.30%0.00%0.00%0.00%0.00%6.93%17.41%0.112
1000.00%100.00%0.00%0.00%0.00%0.00%7.00%17.83%0.113
*Annualized ex-ante values shown for portfolio return and volatility. Ex-ante Sharpe Ratio calculated using the current 3-month treasury bill return as the risk-free rate.