2.

a Covariance Matrix and Expected Returns

Covariance Matrix Expected

Asset 1 2 3 4 5 6 7 8 9 10 Return
1 0.000503 0.000055 -0.000098 0.000257 -0.000169 0.000153 0.000177 -0.000024 -0.000026 -0.000057 0.006583
2 0.000055 0.000955 0.000358 -0.000272 -0.000135 0.000248 -0.000505 -0.000006 0.000411 -0.000531 0.012500
3 -0.000098 0.000358 0.000631 -0.000166 0.000050 0.000000 0.000017 -0.000209 0.000294 -0.000101 0.010917
4 0.000257 -0.000272 -0.000166 0.000783 -0.000023 -0.000081 0.000420 -0.000144 -0.000483 0.000242 0.009500
5 -0.000169 -0.000135 0.000050 -0.000023 0.000666 0.000042 -0.000194 -0.000033 -0.000247 -0.000250 0.006000
6 0.000153 0.000248 0.000000 -0.000081 0.000042 0.000951 0.000038 -0.000210 0.000031 -0.000384 0.013583
7 0.000177 -0.000505 0.000017 0.000420 -0.000194 0.000038 0.000927 -0.000177 -0.000115 0.000360 0.007250
8 -0.000024 -0.000006 -0.000209 -0.000144 -0.000033 -0.000210 -0.000177 0.000760 0.000089 0.000412 0.011250
9 -0.000026 0.000411 0.000294 -0.000483 -0.000247 0.000031 -0.000115 0.000089 0.000712 -0.000330 0.015167
10 -0.000057 -0.000531 -0.000101 0.000242 -0.000250 -0.000384 0.000360 0.000412 -0.000330 0.001560 0.015667

b. Shorting Allowed Portfolios

Min Portfolio Co-variance

Asset Weights Weights
1 0.025707021 0.000029 mean 0.011251616
2 0.178862463 0.000029 MinVariance 0.000029046311
3 -0.188043706 0.000029
4 0.153268651 0.000029
5 0.309620601 0.000029
6 0.016385141 0.000029
7 0.083409422 0.000029
8 -0.074647382 0.000029
9 0.327452632 0.000029
10 0.167985158 0.000029
total 1
Portfolio 1

Portfolio weights Covariance

Asset 1 weights 1 target mean1
1 -0.011939062 0.000019184 mean1 0.011999995 0.012000000
2 0.136929565 0.000031684 Variance1 0.000030627
3 -0.179574707 0.000028339
4 0.212240529 0.000025346
5 0.283446586 0.000017952
6 0.048838952 0.000033972
7 0.025481169 0.000020593
8 -0.082266521 0.000029043
9 0.385633745 0.000037317
10 0.181209745 0.000038373
total 1.000000000

Portfolio 2

Portfolio Covariance
Asset Weights2 weights 2 Target mean2
1 -0.037090646 0.000012595 mean2 0.012499995 0.012500000
2 0.108913651 0.000033446 variance2 0.000033446
3 -0.173916314 0.000027866
4 0.251640202 0.000022874
5 0.265959350 0.000010540
6 0.070521708 0.000037263
7 -0.013221432 0.000014945
8 -0.087356886 0.000029041
9 0.424505107 0.000042843
10 0.190045262 0.000044605
total 1.000000000
Portfolio 3

Portfolio Covariance Target

Asset Weights3 weights 3 mean3
1 -0.062241962 0.000006007 mean3 0.012999995 0.013000000
2 0.080897376 0.000035208 variance3 0.000037675
3 -0.168257723 0.000027393
4 0.291039966 0.000020401
5 0.248472076 0.000003127
6 0.092204493 0.000040554
7 -0.051924346 0.000009297
8 -0.092447236 0.000029038
9 0.463376603 0.000048369
10 0.198880753 0.000050836
total 1.000000000

Portfolio 4

Portfolio weights Covariance

Asset 4 weights4 Target mean4
1 -0.087393804 -0.000000582 mean4 0.013499994 0.013500000
2 0.052881642 0.000036970 variance4 0.000043316
3 -0.162599479 0.000026921
4 0.330439669 0.000017929
5 0.230984926 -0.000004285
6 0.113887264 0.000043845
7 -0.090626757 0.000003649
8 -0.097537636 0.000029036
9 0.502247963 0.000053895
10 0.207716213 0.000057068
total 1.000000000
Portfolio 5

Portfolio Covariance Target mean

Asset weights 5 weights5 5
1 -0.112545144 -0.000007171 mean5 0.013999994 0.014000000
2 0.024865399 0.000038732 variance5 0.000050369
3 -0.156940803 0.000026448
4 0.369839469 0.000015457
5 0.213497567 -0.000011697
6 0.135570174 0.000047136
7 -0.129329700 -0.000001999
8 -0.102627894 0.000029034
9 0.541119245 0.000059420
10 0.216551686 0.000063299
Total 1.000000000

Portfolio 6

Portfolio weights Covariance

Asset 6 weights 6 Target mean6
1 -0.137696856 -0.000013760 mean6 0.014499994 0.014500000
2 -0.003150563 0.000040494 variance6 0.000058833
3 -0.151282350 0.000025975
4 0.409239231 0.000012985
5 0.196010367 -0.000019109
6 0.157252945 0.000050427
7 -0.168032297 -0.000007647
8 -0.107718239 0.000029032
9 0.579990584 0.000064946
10 0.225387178 0.000069531
total 1.000000000
Portfolio 7

Portfolio Covariance Target

Asset weights 7 weights 7 mean7
1 -0.162848388 -0.000020349 mean7 0.014999994 0.015000000
2 -0.031166574 0.000042256 variance 7 0.000068708
3 -0.145624094 0.000025502
4 0.448638949 0.000010512
5 0.178523270 -0.000026522
6 0.178935603 0.000053718
7 -0.206734964 -0.000013295
8 -0.112808726 0.000029029
9 0.618862263 0.000070472
10 0.234222661 0.000075762
total 1.000000000

Portfolio 8

Portfolio Covariance
Asset Weights8 weights 8 Target mean 8
1 -0.187999782 -0.000026938 mean8 0.015499994 0.015500000
2 -0.059182737 0.000044018 variance8 0.000079995
3 -0.139965614 0.000025029
4 0.488038729 0.000008040
5 0.161035984 -0.000033934
6 0.200618462 0.000057010
7 -0.245437755 -0.000018943
8 -0.117899131 0.000029027
9 0.657733698 0.000075998
10 0.243058145 0.000081994
total 1.000000000
Portfolio 9

Portfolio Covariance Target mean

Asset weights 9 weights 9 9
1 -0.213151574 -0.000033527 mean9 0.015999993 0.016000000
2 -0.087198639 0.000045780 variance9 0.000092693
3 -0.134306962 0.000024557
4 0.527438518 0.000005568
5 0.143548653 -0.000041346
6 0.222301342 0.000060301
7 -0.284140370 -0.000024591
8 -0.122989304 0.000029025
9 0.696604754 0.000081523
10 0.251893583 0.000088225
total 1.000000000

Portfolio 10

Portfolio weights Covariance Target mean

Asset 10 weights 10 10
1 -0.238303143 -0.000040116 mean10 0.016499993 0.016500000
2 -0.115214781 0.000047542 variance10 0.000106803
3 -0.128648421 0.000024084
4 0.566838315 0.000003095
5 0.126061436 -0.000048758
6 0.243984094 0.000063592
7 -0.322843111 -0.000030239
8 -0.128079658 0.000029022
9 0.735476248 0.000087049
10 0.260729021 0.000094457
total 1.000000000
Shorting
Allowed Mean Variance
Portfolio
Min Var
PF 0.01125161648 0.0000290463113
PF1 0.01199999507 0.0000306272998
PF2 0.01249999487 0.0000334455639
PF3 0.01299999466 0.0000376752495
PF4 0.01349999445 0.0000433163565
PF5 0.01399999425 0.0000503688850
PF6 0.01449999405 0.0000588328349
PF7 0.01499999384 0.0000687082062
PF8 0.01549999363 0.0000799949989
PF9 0.01599999343 0.0000926932131
PF10 0.01649999322 0.0001068028488

Efficient Frontier - Shorting Allowed

0.01800000000
0.01600000000
0.01400000000
0.01200000000
0.01000000000
0.00800000000
0.00600000000
0.00400000000
0.00200000000
0.00000000000

Efficient Frontier - Shorting Allowed

C. Shorting Not Allowed Portfolios

Min Portfolio
Shorting Not Covariance
Asset Allowed Weights
1 0.04402416 0.00003385860 mean 0.01135445
min
2 0.04781012 0.00003395366 Variance 0.0000338589
3 0.00000000 0.00005959985
4 0.20151271 0.00003383472
5 0.22488357 0.00003384850
6 0.06424464 0.00003385747
7 0.00025155 0.00003382038
8 0.01485073 0.00003367678
9 0.28569568 0.00003386446
10 0.11672684 0.00003389258
Total 1.00000000

Portfolio 1
Portfolio Covariance Target
Asset Weights 1 Weights1 Mean1
1 0.0845070630 0.0000931326 mean1 0.01199999988 0.012
2 0.9154929370 0.0008790446 Variance1 0.00081262947
3 0.0000000000 0.0003191878
4 0.0000000000 -0.0002273204
5 0.0000000000 -0.0001380610
6 0.0000000000 0.0002401138
7 0.0000000000 -0.0004478122
8 0.0000000000 -0.0000071479
9 0.0000000000 0.0003736185
10 0.0000000000 -0.0004906714
Total 1.0000000000
Portfolio 2
Portfolio Covariance
Asset Weights2 Weights2 Target Mean2
1 0.0000000000 0.0000552917 mean2 0.01249999992 0.0125
2 1.0000000305 0.0009550833 Variance2 0.00095508337
3 0.0000000000 0.0003577083
4 0.0000000000 -0.0002720000
5 0.0000000000 -0.0001351667
6 0.0000000000 0.0002481250
7 0.0000000000 -0.0005054583
8 0.0000000000 -0.0000056250
9 -0.0000000305 0.0004105000
10 0.0000000000 -0.0005306667
Total 1

Portfolio 3
Portfolio
Asset Weights 3 Covariance Wts 3 Target Mean3
1 0.0000000000 0.00004006250 mean 3 0.013 0.013
2 0.8124999761 0.00085297395 Variance 3 0.000780603
3 0.0000000000 0.00034573437
4 0.0000000000 -0.00031159376
5 0.0000000000 -0.00015605729
6 0.0000000000 0.00020750520
7 0.0000000000 -0.00043225520
8 0.0000000000 0.00001218750
9 0.1875000239 0.00046699480
10 0.0000000000 -0.00049298437
Total 1.0000000000
Portfolio 4
Portfolio Covariance
Asset Weights4 Weights4 Target Mean4
1 -0.00000100000 0.00002483306 mean4 0.01350000016 0.0135
2 0.62500315767 0.00075086666 variance 4 0.00066560139
3 0.00000000000 0.00033376101
4 0.00000000000 -0.00035118757
5 0.00000000000 -0.00017694764
6 0.00000000000 0.00016688598
7 0.00000000000 -0.00035905361
8 0.00000000000 0.00002999981
9 0.37499784233 0.00052348937
10 0.00000000000 -0.00045530299
Total 1.00000000000

Portfolio 5
Portfolio Covariance
Asset weights 5 weights 5 Target mean 5
1 0.0000000000 0.000048057911 mean 5 0.014 0.014
2 0.0079000446 0.000063188973 variance 5 0.0001128812
3 0.0000000000 0.000075256498
4 0.1640134859 -0.000036223507
5 0.0025590226 -0.000152212416
6 0.1912549802 0.000099051939
7 0.0000000000 0.000103378153
8 0.0000000000 0.000063894801
9 0.4140961029 0.000151552965
10 0.2201763638 0.000168096857
Total 1.0000000000
Portfolio 6
Portfolio Covariance
Asset Weight 6 Weights 6 Target Mean6
1 -0.0000010000 0.0000271112 mean 6 0.0145000001 0.0145000000
2 0.0000000000 0.0000667978 variance 6 0.0001543764
3 0.0000000000 0.0000871954
4 0.0813664298 -0.0000987781
5 0.0000000000 -0.0001672744
6 0.2148367477 0.0001079650
7 0.0000000000 0.0000892648
8 0.0000000000 0.0000930338
9 0.4346788177 0.0001881306
10 0.2691190048 0.0002134461
Total 1.0000000000

Portfolio 7
Portfolio Covariance
Asset Weights 7 Weights 7 Target Mean 7
1 0.0000000000 0.000001144962 mean 7 0.0150000000 0.015
2 0.0000000000 0.000069565575 variance 7 0.0002152015
3 0.0000000000 0.000104010927
4 0.0000000000 -0.000162988242
5 0.0000000000 -0.000187559157
6 0.2083078642 0.000087348086
7 0.0000000000 0.000071850157
8 0.0000000000 0.000132480406
9 0.4653838992 0.000230239637
10 0.3263082366 0.000275372750
Total 1.0000000000
Portfolio 8
Portfolio Covariance Target Mean
Asset Weights 8 Weights 8 8
1 0 -0.00004690576 mean 8 0.0155000327 0.0155
2 0 -0.00021703490 Variance 8 0.0006258690
3 0 0.00003089253
4 0 0.00000001426
5 0 -0.00024891675
6 0 -0.00024585927
7 0 0.00020158721
8 0 0.00030476693
9 0.333236663 0.00001737187
10 0.666762337 0.00092998663
Total 0.999999

Portfolio 9
Portfolio Covariance
Asset Weights 9 weights 9 Target Mean 9
1 0.0000000000 -0.000057388889 mean 9 0.015666667 0.016
2 0.0000000000 -0.000530666667 variance 9 0.001559556
3 0.0000000000 -0.000100527778
4 0.0000000000 0.000241500000
5 0.0000000000 -0.000250083333
6 0.0000000000 -0.000384472222
7 0.0000000000 0.000359833333
8 0.0000000000 0.000412416667
9 0.0000000000 -0.000329694444
10 1.0000000000 0.001559555556
Total 1.0000000000
Portfolio 10
Portfolio Covariance
Asset Weights 10 weights 10 Target Mean 10
1 0.0000000000 -5.7388889E-05 mean 10 0.015666667 0.0165
2 0.0000000000 -5.3066667E-04 variance 10 0.001559556
3 0.0000000000 -1.0052778E-04
4 0.0000000000 2.4150000E-04
5 0.0000000000 -2.5008333E-04
6 0.0000000000 -3.8447222E-04
7 0.0000000000 3.5983333E-04
8 0.0000000000 4.1241667E-04
9 0.0000000000 -3.2969444E-04
10 1.0000000000 1.5595556E-03
Total 1.0000000000

Shorting
Not Mean Variance
Allowed
Portfolio
Min
Var PF 0.011354447 0.000033859
PF1 0.012000000 0.000812629
PF2 0.012500000 0.000955083
PF3 0.013000000 0.000780603
PF4 0.013500000 0.000665601
PF5 0.014000000 0.000112881
PF6 0.014500000 0.000154376
PF7 0.015000000 0.000215202
PF8 0.015500033 0.000625869
PF9 0.015666667 0.001559556
PF10 0.015666667 0.001559556
 Efficient Frontier - Shorting Not Allowed
0.018000000
0.016000000
0.014000000
0.012000000
0.010000000
0.008000000
0.006000000
0.004000000
0.002000000
0.000000000

Efficient Frontier - Shorting Not Allowed

Comparison of Shorting Allowed and Not Allowed Efficient Frontiers

When shorting is allowed, high returns are also obtained (as shown by points obtained in top-right portion of the curve).
But this is accompanied with very high risks. Whereas, when shorting is not allowed, curve starts with minimum risk portfolio and ends with
maximum expected return portfolio.