Understanding the Portfolio Analysis — How It Works
What is Portfolio Analysis?
Portfolio analysis is the process of evaluating a collection of investments to understand its overall risk, return, and diversification. Rather than looking at each stock or mutual fund in isolation, portfolio analysis considers how all assets move together — their correlations — to give you a holistic picture of your financial health.
How to Use This Tool
Step 1: Log in to SpendKeep and navigate to Portfolio Analyser from the sidebar.
Step 2: Use the search box to find your mutual funds (e.g., "HDFC Flexi Cap") or stocks (e.g., "Infosys", "Apple").
Step 3: For mutual funds, choose SIP (enter monthly amount + start date) or Lumpsum (enter invested amount + date). For stocks, enter number of units/shares.
Step 4: Add all your holdings, then click Analyse My Portfolio. The system fetches 1 year of real price data automatically.
Step 5: Review your results — Sharpe Ratio, annualised return, volatility, risk contribution per holding, optimal weights, and your AI verdict.
Understanding the Sharpe Ratio
The Sharpe Ratio measures how much return you earn for each unit of risk taken. A Sharpe Ratio above 1.0 is considered excellent — you are being well-compensated for the risk. Between 0.5 and 1.0 is good. Below 0.5 means you might be taking more risk than your returns justify. A negative Sharpe Ratio means your portfolio is underperforming even a risk-free FD or government bond.
What is the Optimal Weight Suggestion?
Using the Minimum Variance Portfolio technique from Modern Portfolio Theory (MPT), the tool calculates the ideal allocation across your holdings that minimises overall portfolio volatility. The red line on each weight bar shows this suggested weight. If your actual allocation significantly diverges from the optimal, a rebalancing recommendation is flagged.
Risk Contribution Explained
Even if an asset is a small part of your portfolio by value, it could be contributing a disproportionately large share of your total risk — especially if it is highly volatile or correlated with other holdings. The risk contribution percentage tells you exactly which holding is driving your portfolio's volatility so you can make informed decisions.
Are Results Saved?
Yes. Every analysis you run is automatically saved to your account. When you log back in, your last portfolio analysis and AI verdict are loaded instantly without re-running the analysis or consuming API tokens. You can re-analyse at any time to get updated results with the latest market data.