In project management, the effective allocation of resources helps to maximize the impact of project resources. Allocation3M uses three classic allocation models (Mean-Variance, Black-Litterman and Risk-Parity) to optimize resource allocation results from different perspectives. Resource allocation is often used in portfolio management to obtain optimal returns while diversifying risks.
For example, you can allocate your procurement budget based on the monthly raw material prices of 20 suppliers in the Asia Pacific region over the past year. The Risk-Parity model uses Newton’s method to find a set of allocation weights with equal volatility to reduce the risk of raw material price volatility.