Portfolio Return¶

One-line definition¶

The weighted return of the assets held in a portfolio for a given period.

Formula¶

r_p = w^T r = sum_i w_i r_i

Units¶

Return, typically decimal or percent.

Why PMs care¶

It is the basic aggregation from security-level performance to portfolio performance.

Worked example¶

Weights 60% / 40%; returns +10% / -5%.

0.6*0.10 + 0.4*(-0.05) = 0.04 = 4%

Code recipe¶

import numpy as np

def portfolio_return(asset_returns, weights):
    r = np.asarray(asset_returns, float)
    w = np.asarray(weights, float)
    return float(w @ r)

Common mistakes¶

weights not summing to intended net/gross exposure
mixing percent and decimal return units
confusing arithmetic period return with multi-period compounding