Question

I have daily prices of 10 different stocks for 4 years.
How can I select the portfolio of the best 5 stocks out of the 10 in dataset?

Answer 1

The answer to your question can be subjective, in terms of what the perceived underlying value is. For example are you looking for a value stock or a growth stock, in which case they are isolated by high and low P/E multiple.

Since you only have the stock prices, the best approach would be calculating the coefficient of variance (stdev/mean returns) for the individual stocks. This lets you know the how much risk are you taking on for each % of return. Select the ones with the lowest risk and highest relative return, then use solver to conduct a portfolio optimization test to determine the best weights for each stock in the portfolio to get the highest return and lowest risk (stdev)