Create a Portfolio Efficient Frontier Chart in Excel with MarketXLS

The PortfolioEfficientFrontierChart function from MarketXLS is designed to help you instantly visualize the trade-offs between risk and return for a basket of stocks or ETFs directly in Excel. By plotting multiple possible portfolio allocations on a risk-return plane, it empowers you to find an allocation that aims for the best returns relative to the risk taken.

Use this function to balance the weights of different assets and see how a shift in any one asset’s weight can alter the overall risk (volatility) and expected returns of your portfolio. The output is inserted as an image chart right into your spreadsheet, enabling you to monitor and share your portfolio’s efficiency with ease.

Why Use This Function?

• Easily identify the optimal risk-return position (i.e., the “efficient frontier”) for your selected basket of assets.
• Compare different allocations by visualizing how the overall portfolio’s risk and return respond to changes in asset weights.
• Great for portfolio rebalancing, academic studies, investment workshops, or testing out various asset mixes.
• Streamlines complex portfolio analysis into a readily interpretable chart in Excel.
• Quickly see the impact of including or removing specific asset(s) when balancing risk vs. return.
• Automatically handles portfolio weight adjustments if they do not naturally sum to 100%.

How to Use in Excel

Use the function in a cell, referencing the portfolio’s tickers and weights, period length, risk-free rate, and optional parameters (granularity and runDate).

=PortfolioEfficientFrontierChart(portfolio, period, riskFreeRate, [granularity], [runDate])

• portfolio can be a range in Excel containing tickers and corresponding weights (e.g., A1:B5).
• period is the number of months (or daily points, based on granularity) to look back.
• riskFreeRate is expressed as a decimal (0 = 0%, 0.02 = 2%, etc.).
• granularity (optional) can be "monthly" (default) or "daily" if you want a daily-level analysis.
• runDate (optional) can be a start date in "YYYY-MM-DD" format for data retrieval. Otherwise, it defaults to "dummy" in the backend.

When called, it sends your inputs to MarketXLS’s backend, generates the Efficient Frontier chart, and inserts it as an image right into your worksheet. On success, this function returns the text "PortfolioEfficientFrontierChart" in the cell. If an error occurs (e.g., invalid license or data issues), you may see "NA" returned instead.

Parameters Explained

Example Usage

Basic Examples

1. Referencing a small portfolio range with monthly data, 12 months of history, and a 2% risk-free rate:

   =PortfolioEfficientFrontierChart(A1:B3, 12, 0.02, "monthly")

   • Suppose A1:B3 holds three tickers and their weights, for example:
   A1=MSFT, B1=0.40
   A2=AMZN, B2=0.30
   A3=TSLA, B3=0.30

   This function call calculates returns from the past 12 months, uses a 2% risk-free rate, plots the efficient frontier, and places the chart in your Excel sheet.

2. Using default risk-free rate (0%) and default granularity (monthly), explicitly specifying only the portfolio and period:

   =PortfolioEfficientFrontierChart(A1:B4, 24, 0)

   • Analyzes 24 months of historical data.
   • If your portfolio does not sum to 100%, MarketXLS auto-adjusts ticker weights proportionally.

Advanced Scenarios

• Switching to daily data granularity for more detailed risk-return comparisons:

=PortfolioEfficientFrontierChart(A1:B3, 12, 0.02, "daily")

This function will then sample daily returns for roughly the past 12 months, which can detect fine-grained changes in volatility but may be more impacted by short-term price fluctuations.

• Specifying a static runDate for consistent back-testing:

=PortfolioEfficientFrontierChart(A1:B4, 12, 0.01, "monthly", "2023-06-30")

Tells the function to use 12 months of data up to June 30, 2023, along with a 1% risk-free rate, giving you a snapshot of the frontier as of that date.

Common Questions and Troubleshooting

1. "Why am I seeing 'NA' in the output cell?"
   • Your MarketXLS license may not be active or valid.
   • Possibly a server issue or missing data for the requested tickers.
   • There could be an unexpected error in the function call.

2. "My chart is empty or not appearing?"
   • Ensure your portfolio references at least two different tickers.
   • Double-check that your passing parameters (like period and riskFreeRate) are numeric.
   • Check if you used correct date formatting for runDate.

3. "Why is the function automatically adjusting my weights?"
   • If the total weights D1+D2+...Dn are not exactly 1 (100%), the function normalizes them to maintain a valid portfolio.

4. "Can I use this function for single-stock analysis?"
   • While it will attempt to run, a single stock does not generate a meaningful ‘frontier.’ Best practice is at least two tickers.

5. "What happens if my tickers have insufficient historical data?"
   • MarketXLS will attempt to gather data up to your specified period. If major data gaps occur, you may see incomplete results or the function may fail, returning "NA."

By following these guidelines, you can harness the powerful PortfolioEfficientFrontierChart function to assess a variety of portfolio mixes and compare how each allocation stacks up against your desired level of risk and return. Try different periods, adjusting the risk-free rate and granularity, to discover the allocation that meets your goals best.