Optimizing Portfolio Allocation in the Indian Defense Sector: A Python-Based Approach

Optimizing Portfolio Allocation in the Indian Defense Sector: A Python-Based Approach

Avetha Angeline A, Dr. Batani Raghavendra Rao, Dr. Chaya Bagrecha.

CMS Business School, Jain Deemed to be University,

Bengaluru – 560009

ABSTRACT

This paper presents a detailed analysis of portfolio construction strategies aimed at maximizing risk-adjusted returns for investors, utilizing Python-based methodologies. By leveraging historical data on stock returns and risks, a meticulous selection process identified 5 stocks with superior risk-return profiles, outperforming the dataset's average measures with higher returns and lower risks. The selected stocks from the defense industry formed the foundation of an optimal portfolio designed to minimize sector-specific risks while maximizing growth potential.

Through rigorous portfolio optimization techniques, including Markowitz's mean-variance optimization, an optimal portfolio allocation was identified with a return of 62.40% and volatility of 27.74%. Insights from the study provide valuable perspectives for investors seeking realistic and sustainable wealth accumulation strategies. The research also highlights future avenues for exploration, such as integrating alternative asset classes, incorporating behavioral finance insights, and leveraging advancements in risk management technologies. This study contributes to advancing portfolio theory and offers practical guidance for investment decision-making.This study demonstrates the effectiveness of Python in financial analysis and portfolio optimization while furthering the theory of portfolios and providing valuable guidance for making investment decisions.

Keywords: Returns, Risk, Volatility, Optimal Portfolio Construction, Defense Sector, Markowitz Portfolio Theory,