New methodology guarantees highest returns and lowest risk in portfolio optimization.
Portfolio analysis helps investors find the best mix of investments to balance risk and return. A new method called Mixture Design of Experiments (MDE) creates optimal portfolios by using non-linear models, computational replicas, Shannon entropy index for diversification, and desirability function for multiple variables. By simulating time series, the MDE method outperformed the traditional Markowitz Mean-Variance Theory, leading to better decision-making and more precise models.