Portfolio Simulation

Portfolio Simulation:

This tool shows the Monte-Carlo simulation for a number of risky assets. The paths are generated using uncorrelated Normal random variables and are compounded arithmetically. The solid white line shows the results for an equally-weighted portfolio consisting off all the simulated assets.

You can see the effects of diversification – as you increase the number of random assets, the volatility of the portfolio reduces, even though the volatility of each asset in the portfolio remains the same.