China's Low-altitude Economy Sector: Portfolio Strategy Construction and Analysis

Markowitz's efficient frontier and the Capital Allocation Line (CAL) model, as classic paradigms for portfolio optimization, require theoretical and practical innovation in emerging industries, especially in risk-return optimization for innovation-driven sectors. This study, based on modern portfolio theory, constructs and empirically tests a five-asset allocation strategy for China's low-altitude economy. It selects five stocks with positive average returns from December 2021 to December 2024 in relevant fields (like airframe manufacturing, battery technology, and information navigation systems). Using monthly closing prices, it calculates individual stock return characteristics, analyzing their average returns, variance, and standard deviation. A multi-dimensional portfolio is built using a covariance matrix, the efficient frontier is determined through risk-return analysis, and a CAL is constructed with the 3-month Treasury bill risk-free rate to identify the optimal risk portfolio with maximum Sharpe ratio. The results demonstrate that the dynamic strategy's expected return (3.70%) significantly outperforms the CSI 300's average passive return (-0.46%) over three years, with controllable risk.