Bitcoin & Ethereum: Modern Portfolio Theory

Simulation to find the best risk-adjusted-return (Sharpe Ratio) portfolio. Each point represents a portfolio, made with a certain coins composition (weights). The y-axis shows the expected return for a portfolio while the x-axis shows the volatility for it. An expected return of 1.0 means a return of 100% annually. The Expected Returns are based on historical returns so the coins on the simulation require a long price history to create relevant results. The chart also includes the Efficient Frontier in green when more than two assets are selected. Portfolios that lie on the Efficient Frontier maximize the Expected Return for a given volatility. Every portfolio below the Efficient Frontier can be regarded as a sub-optimal portfolio; for the same volatility you are expecting less returns. The Sharpe Ratio is the ratio of the expected return and the volatility. The highest Sharpe ratio for a given composition therefore gives the highest expected return for the least amount of volatilit