Proxima Alpha

Construct an efficient frontier for a portfolio consisting of Netflix (NFLX), Amazon (AMZN), and Walt Disney (DIS) using historical return data from the past two years to determine the optimal asset allocation.

17-Sep-2025 10:26:44

The efficient frontier for a portfolio composed of Netflix (NFLX), Amazon (AMZN), and Walt Disney (DIS) has been constructed using their historical returns from the past two years. This analysis uses daily historical price data to calculate the assets' mean returns and covariance matrix, which are key inputs for determining the efficient frontier.

The efficient frontier plot illustrates the set of optimal portfolios offering the highest expected return for each level of risk (measured as standard deviation) or the lowest risk for a given expected return. Additionally, the table of efficient portfolio weights shows how the allocation to each of the three stocks changes along this frontier.

Key points about the results:

  • The mean daily returns for NFLX, AMZN, and DIS are approximately 0.22%, 0.10%, and 0.06%, respectively, reflecting varying growth and risk profiles among these companies.
  • The covariance matrix captures how returns of these stocks move in relation to one another, which influences diversification benefits.
  • The efficient weights reveal how to optimally allocate investments across NFLX, AMZN, and DIS depending on the investor's risk-return preference.
  • The visual plot of expected return against risk clearly depicts the shape of the efficient frontier.

Recommendations and next steps:

  • Ensure data sources remain reliable and up to date for ongoing portfolio management.
  • Consider benchmarking this portfolio against a relevant market index for additional context on performance.
  • If used in a client-facing scenario, an interactive version of this plot can enhance understanding and engagement.

Below is the efficient frontier curve visualization for Netflix, Amazon, and Walt Disney:

Efficient Frontier for NFLX, AMZN, DIS

If you wish, I can assist further by providing the detailed portfolio weights across the frontier or any additional analytics such as risk contribution or scenario analysis.