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I have split the following portfolio of 20 stocks into 4 quartiles by say market cap. My main question is how would you calculate the Quartile return? Would you rescale the weights within each group so that they add upto 100%, or would you use the actual old market cap weights? If you treat each quartile as a sub-portfolio of stocks then may be rescaling the weights makes sense.

Stocks Weight Return Quartile Wgt Returns? Rescaled-Weights?
AAPL 10.4% 4.2% 1 0.44% 25.12%
MSFT 8.7% 2.6% 1 0.23% 21.01%
AMZN 8% -2.5% 1 -0.2% 19.32%
META 7.8% -10% 1 -0.78% 18.84%
VZ 6.5% 8% 1 0.52% 15.7%
... ... ... ... ... ...
... ... ... ... ... ...
COP 3% -2.6% 4 -0.08% 42.55%
BP 2% 3% 4 0.06% 28.37%
BBB 1.5% 5% 4 0.08% 21.28%
TGT 0.45% 4.3% 4 0.02% 6.38%
DLTR 0.1% -10% 4 -0.01% 1.42%

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What are you trying to calculate? If your point is to find out what return you will get on your portfolio, then multiply the percent of your portfolio that each stock represents by the return.

Like, say you have three stocks, A, B, and C. A is 50% of your portfolio and has a return of 2%, B is 25% and has a return of 4%, and C is 25% and has a return of 8%. So the overall return from your portfolio would be 50% x 2% + 25% x 4% + 25% x 8% = 1% + 1% + 2% = 4%.

If this is what you're trying to calculate, the market capitalization would be irrelevant. Total market cap tells you nothing about how much stock YOU own in that company.

The fact that you are dividing your portfolio into quartiles is irrelevant. If you want to know the return on some subset of your portfolio, okay, calculate based on that subset. How you came up with that subset is irrelevant.

I'm assuming that your "weights" are the percentage of your portfolio that this stock accounts for. If you mean something else by that ... what?

"Rescaling" so that the weighted returns total 100% will tell you what percentage of your returns come from each stock. That is, if you end up saying that stock A is 15% of the total, then if you made a profit of $100 this year then $15 of it came from A. Whether that's a useful number to know, well, depends on what you're trying to do.

As I say, how to do the calculation depends on what it is you're trying to calculate ... and you don't actually say what it is you're trying to calculate! So if I'm guessing wrong, please clarify.

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