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Based on below information and answer the question: Stocks: MWG. HPG. PNJ. NVL. VJC. SSI

Company	Active Portfolio 1	Active Portfolio 2
MWG	30%	32%
PNJ	20%	25%
SSI	5%	3%
HPG	10%	5%
VJC	20%	20%
NVL	15%	5%
BVH	N/A	10%

1. Portfolio management style

• Passive: long term buy and hold
• Active: outperform a passive benchmark, "alpha value"
• Selection of stocks
  • Moving day average

Beta: volatility (higher -> more risk, more return)

Alpha: -1 -> underperformed, 1 -> overperformed

• Fundamental analysis: BVH
• Technical analysis: Double moving average (19/4-29/4

Background and surrounding factors:

• Eurozone economy (globally increase in IR)
  • Facing stagflation, whole region on -.2%+ RGDP in previous quarter
  • Inflation continue to accelerate, prices 7.5%+ from a year earlier, 0.6% from previous month.
  • => due to restrictions oon energy imports (oil gas prices increase)
• Affect Eu more than US
  • Less vulnerable to recessionary pressure as most inflation is due to the increase of energy prices, therefore monetary policy is not necessarily efficient.
  • Substantial risk (commodity prices), high inflation, tightening of monetary policy, contraction of fiscal policy
  • However, this is a measure of domestic demand and is a good reflection of the strength of the domestic economy. In the fourth quarter of 2021, this measure increased at a rate of 1.7%. In the first quarter it accelerated to 2.6%. In other words, underlying demand in the US economy improved.

Key factors:

1. Industry specific factors

• Securities

With regard to recent negative market sentiment in the Vietnamese stock market due to the transparency and a future decision of further increasing interest rate from FED in May, it is likely that the stock market will experience some pessimism. However, there remains support from the Ministry of Finance for the industry. Particularly, some policies will be implied to enhance the transparency in the stock market. This leads to positive sentiments in the long term for investors. Thus, we will maintain SSI in our portfolio since the company could take advantage of the competitive price in this period to have higher returns. However, for risk management, it is better to decrease the weight to 3% instead of 5%.

• Real estate industry

The price of real estate in Vietnam skyrocketed in 2 years of Covid-19 and good inflation control by the government could indicate that the industry could no longer be attractive. There is also further government intervention to prevent speculation by controlling loans for buying property.

https://e.vnexpress.net/news/industries/central-bank-turns-off-tap-limits-loans-for-buying-property-4456807.html

-> decrease the weight of real estate

• Steel industry

The Chinese government is enforcing Zero-covid policy which prevents exports from many countries including Vietnam. Hoa Phat (HPG) is affected by this decision since its profit growth accounted for a large part of exports to China. Thus, although there is a normalization of covid-19 on a global scale with higher demand for steel, it is better to decrease the weight of the steel industry in the portfolio regarding risk management.

Question

Provide comments on total return/active return of the three portfolios and determine the total risk/active risk (by looking at the tracking error) of these portfolios.

Finally, compare and contrast the portfolios that you have created during sessions 1, 2 & 3 and summarize your comments on outcome achieved.

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