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Testing Cherries Portfolios: Valentine’s Day Edition


One of the best parts of the Cherries portfolio building platform is that your optimized portfolios are completely virtual. You don’t have to invest any real money which means your resources and the portfolios you can create are completely unlimited. No idea is too crazy to try out – which is exactly what we’ve done. Introducing, our brand new Valentine’s Day Stock Portfolio.


Have you ever wondered what would happen if you had the time and energy to go all in on Valentine’s Day? To really – REALLY - invest? We decided to see what that would look like.


Step 1: Create a Benchmark

For the control in our experiment, we wanted the most straightforward optimized portfolio we could get, with no funny business. So we built our control portfolio with no customization. We chose a stable risk level, invested $10,000 and ran backtesting for all of 2018. This portfolio was as diverse as possible, including 42 stocks from a wide range of sectors and all three major stock exchanges. Of course it had its ups and downs in the course of 2018 (or would have, if it was real) but in the end, it did well. In that year, a basic optimized portfolio earned 14.59%, or $1459.34. The risk was 1.66%, giving it a risk-return ratio of 8.78.

Step 2: Build the Perfect Valentine’s Day Present

For this stage, we took a step back from the world of finance and thought about creating a perfect basket of Valentine’s Day gifts: something like the basket of goods and services used in the Consumer Price Index but more romantic. Our basket contains red roses, a box of chocolates, and a nice piece of jewelry to be presented, of course, while out for a fancy dinner.


Step 3: Find the Stocks

Our next step was creating the stock portfolio equivalent of this perfect Valentine’s Day gift. To do that, we identified some of the biggest publicly-traded suppliers for each of these items:

  • Roses – 1-800-Flowers is FLWS on the NASDAQ. It’s part of the Services sector.

  • Chocolate – We’re sticking with tradition here, so we’ll get chocolate kisses from the Hershey Company which is HSY on the NYSE, representing Consumer Goods.

  • Jewelry – We’ll go all out with Tiffany & Co. which is TIF on the NYSE and also in the Services sector.

  • Dining – This was a tough one. Most publicly traded restaurants are fast-food chains ala McDonald's. But we did find ONE Group Hospitality (STKS) which operates and manages a variety of more upscale restaurants around the country. It’s traded on NASDAQ as a Service sector company.


Step 4: Compare Results

Unfortunately, the portfolio of love didn’t do very well. Although it rose much higher than our control portfolio, it also sank much lower, ending the year down by 5%, having lost $508.31. And in case you were wondering, Valentine’s Day didn’t seem to help its prospects much. Like a steamy summer fling, our portfolio began heating up in May, June, and July, but it cooled down right along with the weather in October and November.   

The Conclusion: Love Doesn’t Conquer All

Turns out, even Valentine’s Day can’t help a stock portfolio that doesn’t have diversity built in. In the long run, the stock market as a whole goes up if you wait long enough. But individual stocks don’t necessarily go with it. That’s why the more stocks you include in your portfolio, the safer you are. Our Valentine’s Day portfolio included only four stocks in two closely related sectors. The control portfolio included ten times the number of securities from eight different sectors. Next time, we’ll stick with the real-life chocolate kisses.

In the meantime, keep an eye out here for more ways that you can experiment with Cherries backtesting feature and hopefully find a portfolio to fall in love with.  

What is Cherries?​

Cherries in an innovative platform for the construction of personally optimized stock portfolios. Its cutting-edge algorithms are based on groundbreaking statistical and mathematical models.

Cherries was developed by TFI Ltd.

© 2019 by Cherries