" Problems of formation of an investment portfolio in the conditions of high correlation of assets

<p>Annotation student of group 10 E1Azariashvili Georgy Mikhailovich. Faculty of Economics. Department: Financial Management. Topic: &quot; Problems of formation of an investment portfolio in the conditions of high correlation of assets.&quot; Volume of work 107 pages, which included18 figures and 66 tables. When writing diploma used 36 sources. The work consists of three parts. Chapter 1 contains basic information. This chapter outlines the basic definitions related to portfolio investment. Just describe existing types of investment portfolios, their classification is given. We felt it necessary to also describe the main stages of the investment process. Not the last role in information about possible investment objects and their features. Chapter 2 describes the background nucleation portfolio theory, its formation and development. Briefly describes the concepts and views of scientists. Also describe the essence of the correlation, its sources and the problems for the investor. Another point in this chapter is diversification. This method offered by Harry Markowitz in his article &quot;Portfolio Selection&quot; is an effective dealing with correlation and insurance against risks. For this he was awarded the Nobel Prize in economics. Chapter 3 describes a phased solution of the problem of correlation based on the concept of Harry Markowitz. This process has been divided on four stages. In step 1, was composed of a portfolio of assets of one sector of the economy, namely oil and gas. The number of assets in the portfolio was 4. Correlation coefficients were above average. Then based on the analysis of the correlation matrix of the total, the sum of the coefficients of correlation and market risk and the magnitude of the contribution to the optimal portfolio (% of portfolio) the decision was taken to replace the asset for another, more effective.At the final stage 4 quantity of assets in portfolio reached 10. It is stipulated that make calculations with an increasing number of portfolio assets harder and harder. Explanation for this is that when, for example, the number of assets in the portfolio increases from 4 to 10, the number of elements of the covariation and correlation matrix increases exponentially from 16 to 100, which create a certain difficulty in carrying out calculations. Just in the course of increasing the number of assets in the portfolio from 8 to 10 world was not seen significant changes in the risk and return. This can be explained by the fact that it becomes increasingly difficult to find a more efficient asset that could significantly affect the structure and performance of the portfolio. Especially when deal Russia&#39;s unstable market with its raises and downs. Therefore, according to our calculations, and can be considered optimal portfolio with 8 and 10 asset: it depends on the individual preferences of the investor and its financial condition. In the end we want to add that this kind of activity as a portfolio investment is a very popular way of capitalization funds, but it is necessary to understand that this process link to risk to lose everything overnight. Therefore, the investor requires utmost patience and wait for the right moment, especially in the early stages of formation and development, whereas before it opens limitless world of possibilities called investment.</p>