Portfolio Optimization Risk/Return QC – Positions of Humble Div vs Dividend Glenn

Based upon the Portfolio Optimization Algorithm (POA) discussed earlier and the relevant POA QC use-case (positions of The Dividend Breeder), let’s run the similar algorithm to compare top 5 stock positions of Humble Div (HD) vs Dividend Glenn (DG) in terms of the Risk/Return Ratio (RRR) or RRR1=1/RRR.

Let’s define the following common POA parameters:

benchmark_ = [“^GSPC”,]

start_date_ = “2017-01-01”
end_date_ = “2022-10-01”
number_of_scenarios = 10000

delta_risk = 0.1

Let’s compare the following two portfolios:

HD

portfolio_ = [‘SBUX’, ‘TXN’, ‘AQN’, ‘AAPL’, ‘V’]

DG

portfolio_ = [‘INTC’, ‘MMM’, ‘T’, ‘O’, ‘MO’].

The POA output is as follows:

The Table below is the summary of our observations:

Even though both portfolios and market are within our risk boundaries, we can see that RRR1(HD) > RRR1(Market) >> RRR1(DG). We conclude that HD portfolio is the best performer in this QC test.