Portfolio Optimization
Last updated
Last updated
UPTICK. INC. © 2023
Optimize your portfolio using advanced investment management strategies to maximize returns and minimize risk. Choose from various models, including maximizing Sharpe Ratio and minimizing volatility.
PRISM's Portfolio Optimization application empowers users to create or optimize portfolios based on different investment management strategies. By leveraging Uptick's proprietary optimization models, users can measure portfolio risk and make informed adjustments to align their portfolios with their risk and return objectives. The user-friendly interface simplifies the optimization process, enabling users to explore various strategies and make data-driven decisions.
| Strategy Selector
Choose from a range of optimization strategies, such as Maximize Sharpe Ratio, Maximize Return Subject to Annual Volatility, Minimize Volatility Subject to Annual Return, Minimize Conditional Value at Risk, or Minimize Volatility. This flexibility allows users to select a strategy that best aligns with their investment goals and risk tolerance.
| Customizable Parameters
Tailor the optimization process by setting specific parameters, such as sector and asset allocation, CVaR, Sharpe, volatility, beta, and liquidity score. These customizable parameters ensure that the optimized portfolio meets the user's unique investment criteria.
| Visual Comparison
The center panel displays two pie charts that enable users to visually compare their current asset allocation with the optimized allocation. This clear presentation of data helps users understand the impact of the optimization process on their portfolio composition.
| Comprehensive Risk Metrics
The right panel displays key portfolio risk metrics, allowing users to evaluate the optimized portfolio's risk-adjusted performance. By understanding the risk characteristics of their optimized portfolio, users can make more informed decisions about portfolio adjustments.
| Real-time data
Access live market data, including prices, volumes, and market capitalizations, to stay ahead in the rapidly evolving digital asset landscape.
| Customizable views
Personalize the dashboard to focus on the assets and data points that are most relevant to your investment strategies and goals.
| Parameter Name | Value Range | Description/Usage |
|---|---|---|
Start Year | 2015 - 2023 | Start year for data selection for evaluation of an investment strategy |
Maximum Sector Allocation | 0% - 100% | Users can create a diversified portfolio using the sector selector. Each currency is classified into a unique sector from a list of nine sectors. - Smart Contract Platforms - Distributed Computation & Storage - Protocol Interoperability - General Purpose - Staking Instruments and DAO - Application Tokens - Notarization and SCM - Security Tokens - Privacy-Preserving |
Maximum Asset Allocation | 0% - 100% | The maximum allocation or threshold percentage for any asset in the portfolio. Users can set this threshold for diversification, compliance, and rebalancing purposes. |
Minimum Asset Allocation | 0% - 100% | The minimum exposure users want to have to an asset. This parameter helps a portfolio manager keep some exposure to a currency during portfolio creation. |
Maximum Drawdown | 0% - 100% | Users can set an acceptable drawdown value for their portfolio during the portfolio creation process. Maximum drawdown is an indicator of downside risk over a specified period. |
Portfolio Beta | 0 - 2 (or higher) | Portfolio beta is the measure of an entire portfolio's sensitivity to market changes. Portfolio and risk managers can use this selection during various market cycles to modulate the portfolio. |
Sharpe Ratio | 0 - 5 (or higher) | The Sharpe ratio is a measure of risk-adjusted return. Using the 'Maximize Sharpe Ratio', as an optimization scenario, users can gauge the optimal allocation for highest returns. |
CVAR | 0% - 100% | Conditional Value at Risk (CVaR), also known as the expected shortfall, is a risk assessment measure that quantifies the amount of the tail risk of a portfolio. Users can either use this parameter during portfolio construction or set thresholds for compliance and rebalancing. |
Portfolio Correlation | 0(or lower) - 1(or higher) | The correlation coefficient of the assets in the portfolio. This parameter can be leveraged to prevent the portfolio assets from being highly correlated. A correlation of 1 (or higher) means that prices move in tandem; a correlation of 0 (or lower) means that prices move in opposite directions. A correlation of 0 means that the price movements of assets are uncorrelated. |
Maximum/Minimum Volatility | 0% - 10%(or higher) | Users can modulate the portfolio volatility by setting the thresholds for maximum/minimum volatility during various market cycles and backtesting the results. |
Maximum/Minimum Return | 0% - 100%(or higher) | Investment returns threshold for the portfolio. This selection is handy when constructing or optimizing a portfolio for a pool of currencies. |
Risk-Free Rate | 0% - 100% | The risk-free rate parameter allows users to modulate the portfolio during the times of uncertain monetary policy by the Federal Reserve. |
Minimum Liquidity Score | 0 - 100 | The liquidity score is an aggregated index of the liquidity of a cryptocurrency across various exchanges. |
Uptick Risk Score Threshold | 0 - 1 | The risk score is a metric calculated by Uptick that gauges the riskiness of a particular currency based on the following data points: - Developer activity - Twitter sentiment - Reddit sentiment - Market cap - Trading volume - Value proposition - On-chain metrics Currencies above the score of 0.5 are considered high risk. |
Enable Shorting | TRUE/FALSE | This parameter allows users to create a long-short strategy with one click. When enabled, the optimized portfolio generates precise allocations of individual currencies with weights for a long-short strategy. |
Portfolio and Risk Managers can monitor the impact of parameter tuning on the risk metrics during the portfolio creation and optimzation process. Read more about the risk and return metrics here.
A risk manager at a digital asset hedge fund is looking to reduce the overall risk of their portfolio while maintaining the same level of return. They use PRISM's Portfolio Optimization application to select the "Minimize Volatility Subject to Annual Return" strategy, inputting their current portfolio return as the target. After reviewing the optimized asset allocation and risk metrics, the risk manager decides to rebalance the portfolio to achieve the desired risk profile.
A financial advisor working with a high-net-worth client is seeking to diversify their client's portfolio by investing in digital assets. The advisor uses PRISM's Portfolio Optimization application to select the "Maximize Sharpe Ratio" strategy, aiming to maximize risk-adjusted returns. By reviewing the optimized allocation and risk metrics, the financial advisor can recommend a well-diversified digital asset portfolio for their client.
An investment strategist at a crypto-focused investment firm wants to incorporate a tactical sector allocation into their portfolio. They use PRISM's Portfolio Optimization application to input target sector exposures and apply constraints on maximum and minimum asset weights. The resulting optimized portfolio aligns with their desired sector allocation and respects the imposed constraints, allowing the strategist to implement their tactical investment view.
Portfolio and Strategy Selection On the Portfolio Optimization application, select the portfolio you wish to optimize on the left panel.
Select Optimization Method or Custom Investment Strategy Choose an optimization strategy from the available options, such as Maximize Sharpe Ratio, Maximize Return Subject to Annual Volatility, Minimize Volatility Subject to Annual Return, Minimize Conditional Value at Risk, or Minimize Volatility.
Parameter Selection Customize the optimization parameters, such as sector and asset allocation, CVaR, Sharpe, volatility, beta, and liquidity score, to ensure that the optimization process aligns with your investment criteria.
Compare Current Vs. Optimized Portfolio Review the optimized asset allocation displayed in the center panel's pie chart, comparing it to your current asset allocation.
Compare Risk Metrics Evaluate the key risk metrics presented in the right panel to understand the risk characteristics of your optimized portfolio.
Portfolio Modification Based on the insights gained from the optimized asset allocation and risk metrics, make informed decisions about adjusting your portfolio to better align with your investment objectives and risk tolerance.
