Optimizing Investment in the Automotive Industry: A Modern Portfolio Theory Approach with Tesla, GM, and Hyundai

Ruotai Zhang ()
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Ruotai Zhang: The University of Edinburgh

A chapter in Proceedings of the International Workshop on Navigating the Digital Business Frontier for Sustainable Financial Innovation (ICDEBA 2024), 2025, pp 303-316 from Springer

Abstract: Abstract The automotive manufacturing sector is undergoing a significant transformation, which is mainly driven by innovations in sustainable technology and the increasing demands in electric vehicles (EVs). This transition to environmentally friendly technologies in the industry creates substantial opportunities and challenges for potential investors. The Modern Portfolio Theory (MPT) offers a feasible solution for optimizing investment portfolios by balancing risk and return. This research explores the application of MPT to form an optimal portfolio within the automotive sector, specifically focusing on U.S. stocks from Tesla, General Motors (GM), and Hyundai. Simulations were carried out using six months of data in 2024 from the Nasdaq, and the results showed that a portfolio comprised of Tesla and GM stocks, with zero allocation to Hyundai, offers the optimal balance. The findings highlight the role of correlation analysis and diversification in portfolio management. Overall, this research aims to emphasize the relevance of MPT method in guiding investment decisions in dynamic and innovative markets, as well as providing valuable insights for investors seeking to navigate the evolving landscape of the automotive industry.

Keywords: Modern Portfolio Theory; Portfolio Optimization; Diversification; Sharpe Ratio (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-652-9_31

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DOI: 10.2991/978-94-6463-652-9_31

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