# Portfolio Efficient Frontier in Python

Introduction

Investors often aim at maximizing returns on investment for a given level of risk. This can be achieved by selecting a number of assets in which to invest in so as to minimize the risk and at the same time maximize the returns on investment. An efficient frontier represents a set of optimal portfolios that offer the highest expected returns for a defined level of risk (https://www.investopedia.com/terms/e/efficientfrontier.asp).

In this tutorial, we will demonstrate how to construct an efficient portfolio of a two-asset portfolio based on the different weight combinations of the assets. The assets we will use for this demonstration are two S&P 500 Exchange Traded Funds (ETFs) of XLE and XLI. . We then proceed to select a suitable portfolio combination on the efficient frontier based on the risk tolerance and the required expected returns.

**Import Required Packages**

**Load the Data**

**Plot of the Daily Close Prices**

## Calculate the Daily Log Returns

## Daily and Annualized Standard Deviation of Returns

## Correlation of Returns

## Construction of an Efficient Frontier

**Portfolio Weights**

### Portfolio Returns and Volatilities

### Expected Returns using Capital Asset Pricing Model (CAPM)

## Portfolio Efficient Frontier

## Selecting a Portfolio with Defined Constraints

Github Link

## Comments