Efficient frontier calculator
Pick two or three ETFs. The calculator replays every mix in 5% steps on real monthly returns and plots its return against its volatility, so you can see how combining funds changed the risk and which mixes did best for each level of risk.
Loading monthly returns…
Monthly total returns with dividends reinvested, rebalanced monthly. The best mix of the past is known only with hindsight and is not a recommendation or a forecast.
How to read the chart
Each light dot is one mix. The dark line joins the efficient mixes: for each level of volatility, nothing earned more. The orange dots are the single funds on their own.
Watch how far the line bends to the left of the single funds: the bigger the bend, the more the funds diversified each other in this period.
Questions
What is the efficient frontier?
Introduced by Harry Markowitz in 1952, it is the set of portfolios that give the highest return for each level of risk. Any mix below the frontier could have earned more for the same volatility, or taken less volatility for the same return.
How is it calculated here?
Every combination of the chosen funds in 5% steps is replayed on their common monthly returns, rebalanced each month. The calculator plots each mix by annual volatility and annual return and connects the mixes that no other mix beats on both.
Is the best historical mix the best for the future?
No. The frontier is drawn with hindsight; returns, volatilities and correlations change over time, and the mix that looked best in one period is rarely the best in the next. Use it to understand how combining funds changes risk, not as a recommendation.
Why can a mix be less volatile than either fund alone?
When two funds do not move in step, their ups and downs partly cancel out. The lower the correlation between them, the more a mix can reduce volatility – the core idea behind diversification.
More free tools
Source: MarketStack end-of-day prices, total return with dividends reinvested. Figures are historical and descriptive; they are not forecasts and not investment advice. MEDGE Capital does not recommend buying or selling any instrument. Risk disclaimer.