The Optimal Selection of Financial Portfolios Within The Context of Tadawul Saudi Stock Exchange

Abstract

The Tadawul Stock Exchange, a key component of the Saudi Tadawul Group, is the focus of this investigation, which will examine the exchange's portfolio management dynamics. As the financial business sector as a whole is undergoing extraordinary changes brought about by innovation, globalization, and evolving market structures, understanding portfolio improvement in Tadawul becomes relevant. Using positive thinking and a logical methodology, the study employs advanced financial assumptions to identify a portfolio with fundamental differences and pinpoint the productive Tadawul area using verifiable stock prices for the period November 2020 to October 2023. Tadawul reserves were identified during exploration in 2021. The participant engages in the largest exchange trading in the Middle East and is a significant factor in the global financial climate. This review is expected to add important information to portfolio management methodologies in this unique environment. A comprehensive audit philosophy, including information mining strategies using Python libraries, ensures audit reliability and legitimacy. The cross- sectional investigation covers this period and focuses on 125 selected organizations out of 231 registered in Tadawul. The information diversity process involves careful pre-processing to resolve issues such as missing values and inconsistencies. The review determines performance returns using Excel Solver, combining equal-weight portfolios, the global portfolio with the smallest difference, and portfolios that form an efficient frontier. The results of the equal-weighted portfolio show the significance of portfolio diversification in the Tadawul, with a Sharpe ratio of 0.104, risk of 7.2774 percent, and return of 0.7598 percent. The global portfolio has a minimum risk ratio of 1.115%, a return of 0.2012%, and a Sharpe ratio of 0.175. Additionally, the review differentiates between a portfolio that produces the most extreme Sharpe ratio with a return of 0.688%, a portfolio risk of 1.6374%, and a Sharpe ratio of 0.421. The efficient frontier, which includes 23 portfolios, provides investors with valuable information about risk and return. This study contributes to a deeper understanding of Tadawul Stock Trading's portfolio management and contributes to the broader field of financial portfolio simplification.