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Assessment and Analysis of the Role of the Energy Sector in an Investment Portfolio
Huz O. B.

Huz, Ostap B. (2025) “Assessment and Analysis of the Role of the Energy Sector in an Investment Portfolio.” Business Inform 9:151–159.
https://doi.org/10.32983/2222-4459-2025-9-151-159

Section: Investment Processes

Article is written in Ukrainian
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UDC 336.76:620.9

Abstract:
The aim of this study is a comprehensive analysis of the opportunities and prospects for investing in the stocks of energy sector companies. To achieve this aim, the following objectives need to be addressed: to examine the characteristics of energy sector companies’ stock behavior in financial markets; to construct and evaluate investment portfolios that include shares of energy industry companies; to determine the role, importance, and impact of the energy sector on the efficiency and balance of an investment portfolio. In line with this objective, the study proposes an appropriate algorithm consisting of the following stages: formation of the initial dataset and its preliminary statistical processing; construction of investment portfolios; comparative evaluation of portfolios and assessment of the role of energy sector assets. The second stage is implemented by constructing the Markowitz model, which makes it possible to obtain the so-called optimal investment portfolio. The main idea of the model is that it evaluates not individual assets, but the entire portfolio as a whole, since combining different instruments allows risk reduction through diversification. The diversification effect arises from accounting for the correlation between assets. The Sharpe ratio is used to compare portfolios. The algorithm was tested on a dataset containing information on the daily closing prices of eleven sectoral indices of the SP500 stock index. As a result, a set of portfolios forming the efficient frontier was obtained. The energy sector is present only in the first three portfolios, with its share not exceeding 5% each time, and those portfolios have the lowest Sharpe ratios among the portfolios forming the efficient frontier. The algorithm proposed in this work is quite versatile and can be used to analyze the role and importance of individual components of any investment portfolio.

Keywords: investments, stock index, energy sector, risk, return, optimal portfolio, efficiency.

Fig.: 3. Tabl.: 3. Formulae: 3. Bibl.: 17.

Huz Ostap B. – Postgraduate Student, Department of Entrepreneurship, Trade and Logistics, National Technical University «Kharkiv Polytechnic Institute» (2 Kyrpychova Str., Kharkіv, 61002, Ukraine)
Email: [email protected]

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