group assignment subject financial investment topic creating optimal portfolio

Hoa Phat Group HOSE stock code: HPG is one of the leading steel manufacturing corporations in Vietnam and one of the companies with a strong position in this field.. VietJet Air HOSE sto

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BANKING AND FINANCE DEPARTMENT

GROUP ASSIGNMENT

SUBJECT: FINANCIAL INVESTMENT LECTURER: M.S NGUYEN CHI KHOA

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Group members

No IName Student Code

Ho Chi Minh City, December 7, 2023

TABLE OF CONTENTS

Step 1: Choosing 5 stocks in VNINDEX 1212191 191111111111111011121 80111 11118 x8 kg Step 2: Doing the T€BT€SSIOT 1 102010111011 01 1011101115111111 1112111 111 11 11 111 1111010 1111 011 tờ Step 3: Making a COVATIATC€ ITIAẨTIX G2 2002031211211 101111 1511521111581 211 1111211 11111111 11g Hxkg Step 4: Following the steps as in Appendix AÁ Chapter 7 c2 2H re Step 5: Graphing the efficient frontier and the CAÁL, ó2 22.22211211 111111 15151515122

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ASSIGNMENT OF CREATING OPTIMAL PORTFOLIO

Step 1: Choosing 5 stocks in VNINDEX, briefly introducing the Stocks, stating out then reason for choosing this portfolio of stocks

1 General reason:

Our team selected an investment portfolio of 5 stocks as follows: HPG, VJC, PLX, VCB, and MCH The reason we chose this investment portfolio is that these stocks wield substantial influence over market movements, aligning perfectly with our pursuit of robust returns Moreover, by handpicking companies from diverse industries, we've strategically hedged against market shifts, enhancing the resilience of our portfolio This approach blends the potential for high profitability with smart risk diversification, setting the stage for a compelling investment journey

2 Brief introduction of stocks:

a Hoa Phat Group (HOSE stock code: HPG) is one of the leading steel manufacturing corporations in Vietnam and one of the companies with a strong position in this field

e Highlights about Hoa Phat Group (HPG):

ion an ing: HPG is a leading company in steel production and trading They operate in the fields of manufacturing construction steel, hot rolled steel coils, cold rolled steel coils, steel pipes and other steel products

© Product diversification: Hoa Phat not only produces steel but also expands into real estate, manufacturing and trading a number of other consumer products

© Development strategy: The company regularly implements a strategy to expand and upgrade technology, focusing on product quality and expanding consumer markets

© Contribution to the industry and economy: HPG makes an important contribution to Vietnam's steel industry and economy through providing quality products and creating jobs

= Hoa Phat Group's HPG shares often attract investor attention due to the company's leadership position in the steel industry

b VietJet Air (HOSE stock code: VJC) is one of the largest international airlines in Vietnam, famous for its low-cost business model and flight network covering the region and internationally

e Highlights about VietJet Air (VJC):

© Low-cost business model: VJC is famous for providing flights at attractive prices, attracting many customers

© Extensive flight network: VietJet expands its flight network not only domestically but also to international destinations, meeting the travel needs of people and tourists

© Development strategy: VJC constantly implements the strategy of expanding its flight network and diversifying services to seize opportunities and optimize profits

© Contribution to tourism and economy: This airline makes an important contribution to the development of Vietnam's tourism and economy through expanding its flight network and attracting tourists

=VietJet Air's VJC stock often attracts great attention from investors thanks to its attractive business model and growing influence in the aviation industry

c Petrolimex (HOSE stock code: PLX) is one of the largest enterprises in the petroleum business in Vietnam and has great influence in the energy industry

e Highlights about Petrolimex (PLX):

© Petroleum business: Petrolimex operates mainly in importing, producing, distributing and retailing gasoline, fuel oil, diesel oil, lubricants, and many other energy products

© Extensive network: The company has a large distribution network, with thousands of stores across Vietnam, supplying petroleum to industries and end consumers

© Contribution to the economy: Petrolimex makes an important

contribution to the energy supply and has a great influence on production activities and people's daily lives

© Development_strategy: The company regularly implements strategies to improve product quality, expand distribution network and diversify services to enhance competition

=>Petrolimex's PLX stock often attracts great attention from investors with its large position in the energy industry and extensive distribution network

d Vietcombank (HOSE stock code: VCB) 1s one of the largest and most prestigious banks in Vietnam, with a strong position in the banking industry

e Highlights about Vietcombank (VCB):

© Leading bank: Vietcombank is considered one of the leading banks in Vietnam with an extensive network and strong presence

in many financial fields

© Diverse services: VCB provides a wide range of financial services from savings, credit, loans, payments, electronic banking services and many other financial products for individuals and businesses

© International cooperation: Vietcombank has close cooperative relationships with many international banks and financial Institutions, expanding its influence and business capabilities

© Technology development: Technology plays an important role in providing banking services, and Vietcombank constantly invests

in technology to provide the best banking experience for

customers

= VCB shares often receive great attention from investors because of Vietcombank's leadership position in the Vietnamese banking industry

e Masan Consumer Holdings (HOSE stock code: MCH) is a consumer goods management unit of Masan Group, one of the leading corporations in Vietnam MCH mainly operates in the field of manufacturing and distributing daily consumer products

e Highlights about MCH:

© Diverse product portfolio MCH owns and manages many famous brands in many different fields, from processed foods to personal consumption products and bottled water

© Development strategy: MCH regularly focuses on improving product quality and expanding consumer markets to compete strongly

© Position in the market: Thanks to the diversification of product portfolio and marketing strategy, MCH has built a strong position

in the Vietnamese consumer goods industry

=MCH stock often attracts investor attention due to Masan Consumer Holdings' position in the consumer goods sector

Step 2: Doing the regression of risk premium of stock returns to

calculate beta coefficient of stocks (regression of daily returns in 3

years until the latest date) based on CAPM model

Calculate the standard deviation of VNINDEX (6M)

Based on the CAPM model: R:=R;+B (Rn -R;)

> Beta () is the slope value of the regression line, Market return (8,,) serves as the independent variable, Return on each stock (R;) serves as the dependent variable

e The SLOPE function in Excel indeed calculates the slope of the linear regression line based on provided data It's part of Excel's linear regression tool

=> We used SLOPE function with formula: =SLOPE(R;:R,,) — To find the beta coefficient for each stock

Simultaneously, we computed the average return, the variance, and the standard deviation of five stocks and the market (VNIndex), as indicated in table 1

VN INDEX HPG VIC PLX VCB ite BETA 1 1.317349876 | 0.42061377 |0.972839046| 0.76332992 | 0.132325168

Variance 0.000179265 | 0.000601422 | 0.00024797 |0.000421168) 0.000328661 | 0.000254372

Standard Deviation] 0.013388988 | 0.024523916 | 0.01574704 |0.020522384| 0.01812902 | 0.015949042

|Average Return 0.00024089 | 0.000584699 | -4.244F-05 | -0.00030564| 0.000426115 | -4.50535E-05

Source: Author's calculation from research data

Step 3: Making a covariance matrix of stocks, using the formula

Cov(rA,rB) =

beta(A) *beta(B) *o M*2

To determine the correlation between 5 stocks which market risk is changed by year,

we used covariance matrix with oM=1.34%

Table 2: Covariance Matrix

9.93299E-05 3.17148E-05 7.33534E 5.75561E-05 9.97749E 0.000229741 7.33534E-05 0.000133122 2.3077E-05 0.000180264 5.75561E-05 0.000104453 1.81072E-05 3.12492E-05 9.97 2.307 1.81072E-05

Source: Author's calculation from research data

Step 4: Following the steps as in Appendix A chapter 7 (APPENDIX A: A Spreadsheet Model for Efficient Diversification)

to find the optimal portfolio from stocks

Firstly, we calculates the market indexes by year:

Table 3: Market indicators by year

1.00000 0.06232 0.03543 | 0.21254 0.02689

Source: author's calculation from research data

Then continues calculates the expected excess returns (risk premium) of the 5 stocks:

Table 4: Expected excess returns of stocks

Expecfed excess refurns

1.317349876 3.54297%

0.420613766 1.13123%

0.972839046 2.61642%

0.76332992 2.05295%

0.132325168 0.35588%

Source: author's calculation from research data The team creates the Covariance Matrix with weights randomly assigned to each stock and make sure that the total weighting is 100%, resulting in the following:

Table 5: Covariance matrix

0 7 0

0

0.00226 0.00052 | 0.00045 | 0.00051

0.00010 0.00005 0.00005 0.00034

Source: author's calculation from research data Finally with all data recommend above, we continues find the indexes related to the 5- stock portfolio with the results:

Table 6: Category relevance portfolio

Risk Premium 0.0101751326 Std Dev 0.02370

Sharpe ratio 0.42935

Source: author's calculation from research data

Step 5: Graphing the efficient frontier and the CAL

The table below displays several portfolios' characteristics along the efficient frontier

The optimal risky portfolio (highest sharpe ratio) and the minimal standard deviation are represented by the two highlighted columns The weighting of each stock in the portfolio and its characteristics are displayed in each column of the table

The team also used the "Solver" in Excel to find the portfolio weights with minimal variance After that spreadsheet will automatically calculate the risk premium and sharp ratio of that portfolio To easily determine all the data - portfolio weights and its statistics - have been recorded in Table 7 It also pointed us to the lowest achievable standard deviation (SD) of 2.4%

Then we will find the portfolio with the lowest variance possible for any target risk premium flow along the efficient frontier The portfolio with the highest Sharpe ratio was then sought after This is the efficient frontier portfolio that is exposed to the CAL We utilized "Solver" to optimize the Sharpe ratio for the portfolio, resulting in a maximal harpe ratio of 48.09%,

Specifically, the ideal risky portfolio's Sharpe ratio is equal to the slope of this CAL curve As a result, we created a row at the bottom of Table 7 that computes the CAL

by multiplying the Sharpe ratio of the ideal risky portfolio by the standard deviation of each column's portfolio As a result, each portfolio along the CAL has a risk premium

In conclusion, Solver has determined the proper capital allocation ratio for each situation in order to optimize the portfolio utilizing the computed data from the tables

The table below provides a detailed data has recommended

Source: author's calculation from research data

To be able to draw the efficient frontier and CAL, we have created a data filter for ease of work

Table 8: Data for drawing efficient frontier and CAL

0.023699047| 0,027907084] 0.044798275] 0.072541249] 0.112257323| 0.164004557

0.010175133| 0014596815] 002] 0.02500002| 0.03] 0.03500003

0.012395799| 0.014596815| — 0.023431762| 0.037942739| 0.058716254] 0.085782672

Source: aquthor s calculation from research data

Finally an efficient frontier and CAL plot have presented with the vertical axis being the risk premium and the horizontal axis being the standard deviation of each portfolio

Graph 1: The graph of Efficient frontier and CAL

THE GRAPH OF EFFIENCNT FRONTIER & CAL

0.023699047 0.027907084 0.044798275 0.072541249 0.112257323 0.164004557

Efficienct Frontier ==== CAL

Source: aquthor s calculation from research data

From the resulting table, we found the portfolios lying on the efficient frontier with the smallest standard deviation of 0.02369 The optimal risky portfolio is the point

at which there is a tangent between the efficient frontier and the CAL and has the highest Sharpe coefficient of 0.52305, standard deviation of 0.02790, and a risk premium of 0.014596

REFERENCES

Annual report Hoa Phat Group (HPG) period 2020-2023 Vietstock Retrieved November 23, 2023

Annual report Vietjet Air (VJC) period 2020-2023 Vietstock Retrieved November 23,

2023

Annual report Petrolimex (PLX) period 2020-2023 (2023, March 20) Vietstock Retrieved November 23, 2023

Annual report Vietcombank (VCB) period 2020-2023 (2023, March 20) Vietstock Retrieved November 23, 2023

Annual report Masan Consumer Holdings (MCH) period 2020-2023 (2023, March 27) Vietstock Retrieved November 23, 2023

Hoa Phat Group (HPG) Gia Ca Lich Su (n.d) Investing.com Retrieved November

23, 2023

Vietjet Air VIC) Gia Ca Lich Sw (n.d.) Investing.com Retrieved November 23, 2023

Petrolimex (PLX) Gia Ca Lich Sw (n.d) Investing.com Retrieved November 23,

2023

Vietcombank (VCB) Giá Cả Lịch Sw (n.d.) Investing.com Retrieved November 23,

2023

Masan Consumer Holdings (MCH) Gid Ca Lich Sw (n.d.) Investing.com Retrieved

November 23,2023

VN Lich Sw Gid (n.d) Investing.com Retrieved November 23, 2023

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