Efficient Frontier & Rebalancing Bonus illustration

Efficient Frontier & Rebalancing Bonus

Builds the Markowitz efficient frontier for a small set of assets from your expected returns, volatilities and pairwise correlations. It samples 2000 random long-only portfolios to show the cloud of possibilities, traces the frontier of minimum-risk portfolios along it, and solves for the two classic corner portfolios: minimum variance and maximum Sharpe ratio (best excess return per unit of risk above your risk-free rate). It also estimates the “rebalancing bonus” — the extra geometric return an equal-weight, regularly rebalanced mix earns over the average of its parts, roughly half the variance you diversify away.

Three columns per line: a one-word name, the expected annual return in %, and the annual volatility in %. Commas are optional. 2–8 assets.
One line per asset pair: the two names and their correlation between -1 and 1. Pairs you leave out count as 0.

Notes

  • The frontier is only as good as its inputs — expected returns are guesses, and small changes in them move the optimal weights a lot.
  • Low or negative correlation is the free lunch: it lets the portfolio be calmer than any of its parts.
  • The rebalancing bonus ≈ (average variance − portfolio variance) / 2 — harvesting it requires actually selling winners to buy losers on a schedule.
  • Long-only weights are assumed; with short selling the frontier extends further but the math and the risks change.
  • This is an educational estimate, not financial advice; talk to a qualified adviser before making money decisions.