Modern Portfolio Theory — TSX 60
This demonstration shows how ClearLedger optimizes a TSX 60 equity portfolio using Modern Portfolio Theory.
Download Spreadsheet
You can download the exact ClearLedger export used in this demonstration:
About This Demo
This ClearLedger export shows how a TSX 60 portfolio’s return and risk profile changes when its weights are optimized using Modern Portfolio Theory (MPT). ClearLedger does not select stocks or make predictions — it simply determines the most efficient mix of the holdings you already own.
ClearLedger adjusts weights, not securities. Optimization increases expected return, reduces risk, or improves both simultaneously.
Buy / Hold / Sell Signals
These signals do not mean buy or sell the stock. They are mathematical weight‑adjustment signals used to move your portfolio toward the efficient frontier.
How ClearLedger Performs TSX 60 Optimization
ClearLedger evaluates a TSX 60 portfolio using a full covariance matrix constructed from the selected time horizon. Each security’s variance, covariance, and correlation contributes to the portfolio’s total risk. Rather than predicting future prices, the optimizer identifies the most efficient combination of weights based on historical relationships between the assets.
The engine builds the efficient frontier by solving a constrained quadratic optimization problem. Weight limits, diversification rules, and risk‑adjusted efficiency targets ensure the optimized portfolio remains realistic and investable. ClearLedger focuses on improving the total portfolio, not individual stocks, which is why metrics such as expected return, volatility, Sharpe ratio, alpha, beta, and correlation all shift simultaneously.
Because TSX 60 constituents exhibit sector concentration and correlation clustering, the optimizer frequently reduces overweight positions in highly correlated sectors while increasing exposure to lower‑correlation components. This rebalancing effect is what drives the improvement in risk and return metrics shown in the Technical Summary.
Total Portfolio Technical Summary
The Technicals table in Demo‑3.xlsx shows how the entire portfolio behaves today versus after optimization.
Expected Return
The optimized portfolio increases expected return (ExpR) from 0.191 to 0.320.
Risk
Total portfolio risk decreases from 0.132 to 0.116.
Sharpe Ratio
The Sharpe ratio improves from 0.934 to 2.135.
Alpha
Portfolio alpha increases from 0.1198 to 0.2360.
Beta
Portfolio beta decreases from 0.6096 to 0.4298.
Correlation
Overall correlation improves from 0.3920 to 0.2963.
Actual vs Expected Return
Actual vs Expected Return improves from 0.1572 to 0.1888.
Benchmark Comparison
The benchmark gap improves from 5.71 to 8.87.
Every metric improves because the optimizer focuses on the total portfolio — not individual stocks.