Course: RSM336: Risk Management for Financial Managers

This group project was part of a simulated portfolio management competition focused on building and maintaining a diversified investment portfolio over several months.

Our group (“Diversified Delta”) constructed a two-pronged portfolio: 70% allocated to a Medium-Large Cap Defensive Strategy (MLCDS) and 30% to a Small-Medium Cap Value Strategy (SMCVS). The goal was to deliver competitive performance while managing risk in a volatile macroeconomic environment.

We combined top-down macro analysis with bottom-up fundamental research to guide our security selection. The MLCDS was built around large-cap equities, ETFs, and bonds designed for stability and downside protection. The SMCVS targeted undervalued stocks with strong fundamentals, limited analyst coverage, and asymmetric upside. We performed our own valuations using DCF and DDM models to identify mispriced opportunities like CTBI and PTON. While the portfolio slightly underperformed the S&P/TSX Composite on a nominal return basis, it generated strong risk-adjusted performance — including a Sharpe ratio of 1.34 and positive alpha (1.22%) over the trading period.

Key Concepts:

• Defensive portfolio design with beta < 0.3

• Fundamental analysis (P/E, P/B, ROE, dividend growth)

• Strategic asset allocation: 70/30 blend of stability and alpha

• Valuation models: DCF, DDM, relative metrics

• Trading discipline via internal CIO review process

• Risk metrics: Sharpe Ratio, Alpha, Beta, CAPM expected return

• Real-time rebalancing based on market movements and factor exposure