Portfolio risk and return between energy and non-energy stocks

• Published in: Heliyon Vol. 10; no. 10; p. e31199
• Main Authors: Nautiyal, Neeraj, Alrababa'a, Abdel Razzaq, Rehman, Mobeen Ur, Vo, Xuan Vinh, Saleh Al-Faryan, Mamdouh Abdulaziz
• Format: Journal Article
• Language: English
• Published: England Elsevier Ltd 30.05.2024; Elsevier
• Subjects: Energy stocks; Non-energy stocks; Portfolio; Sharpe ratio; Sharpe ratio; Non-energy stocks; Energy stocks; Portfolio
• ISSN: 2405-8440; 2405-8440
• DOI: 10.1016/j.heliyon.2024.e31199

This paper aims to examine the potential for portfolio returns by adding together conventional and energy stocks with varying proportions. We examine the risk and return characteristics of a portfolio comprising energy and non-energy stocks from twenty countries. The period for daily data ranges from 2nd July 1999 to 2nd July 2021. We use multiscale Sharpe and VaR ratios to examine the risk and returns behaviour of a portfolio with varying composition between energy and non-energy stocks across different investment periods. Our results highlight optimal returns for the equally weighted portfolio during normal and crisis periods except COVID-19 during which more proportion of conventional stocks is preferred. Risk estimates advocate an equally weighted portfolio for all periods however risk varies with the holding period. These results carry useful investment implications during short- and long-run holdings of conventional and energy stocks in a portfolio. •We examine risk and return characteristics of energy and non-energy stocks.•Multiscale Sharpe and VaR ratios are used to examine risk and returns behavior.•Energy-weighted portfolios yield optimal returns in the short-run except Mexico and Japan.•Equally weighted portfolios are favorable in the long-run.•During the COVID-19 period, greater proportion of conventional stocks is preferable.