# Load packages

# Core
library(tidyverse)
library(tidyquant)

Goal

Visualize and examine changes in the underlying trend in the performance of your portfolio in terms of Sharpe Ratio.

Choose your stocks.

from 2012-12-31 to present

1 Import stock prices

symbols <- c("NVDA", "AAPL", "NFLX", "MSFT", "TSLA")
prices <- tq_get (x = symbols,
                  from = "2012-12-31",
                  to = "2017-12-31")

2 Convert prices to returns (monthly)

asset_returns_tbl <- prices %>% 
    
    group_by(symbol) %>% 
    
    tq_transmute(select = adjusted, 
                 mutate_fun = periodReturn,
                 period = "monthly",
                 type = "log") %>% 
    
    slice(-1) %>% 
    
    ungroup() %>% 
    
    set_names(c("asset", "date", "returns"))

3 Assign a weight to each asset (change the weigting scheme)

# Symbols
symbol <- asset_returns_tbl %>% distinct(asset) %>% pull()
symbols
## [1] "NVDA" "AAPL" "NFLX" "MSFT" "TSLA"
# Weights
weights <- c(0.25, 0.25, 0.2, 0.2, 0.1)
weights
## [1] 0.25 0.25 0.20 0.20 0.10
w_tbl <- tibble(symbols, weights)
w_tbl
## # A tibble: 5 × 2
##   symbols weights
##   <chr>     <dbl>
## 1 NVDA       0.25
## 2 AAPL       0.25
## 3 NFLX       0.2 
## 4 MSFT       0.2 
## 5 TSLA       0.1

4 Build a portfolio

# ?tq_portfolio

portfolio_returns_tbl <- asset_returns_tbl %>% 
    
    tq_portfolio(assets_col = asset,
                 returns_col = returns, 
                 weights = w_tbl,
                 rebalance_on = "months", 
                 col_rename = "returns")

portfolio_returns_tbl
## # A tibble: 60 × 2
##    date       returns
##    <date>       <dbl>
##  1 2013-01-31  0.0926
##  2 2013-02-28  0.0258
##  3 2013-03-28  0.0195
##  4 2013-04-30  0.109 
##  5 2013-05-31  0.0998
##  6 2013-06-28 -0.0456
##  7 2013-07-31  0.0755
##  8 2013-08-30  0.0906
##  9 2013-09-30  0.0378
## 10 2013-10-31  0.0188
## # … with 50 more rows

5 Compute Sharpe Ratio

# Define Risk Free Rate 
rfr <- 0.0003

portfolio_SharpeRatio_tbl <- portfolio_returns_tbl %>% 
    
    tq_performance(Ra = returns,
                   performance_fun = SharpeRatio,
                   Rf = rfr,
                   FUN = "StdDev")

6 Plot: Rolling Sharpe Ratio

# Create a Custom Function to Calculate Rolling SR 
Calculate_rolling_SharpeRatio <- function(data) {
    
    rolling_SR <- SharpeRatio(R = data, 
                Rf = rfr, 
                FUN = "StdDev")
    
    return(rolling_SR)
    
}

# Define Window 
window <- 24

# Transform Data: Calculate Rolling Sharpe Ratio
rolling_sr_tbl <- portfolio_returns_tbl %>%
    
    tq_mutate(select = returns, 
              mutate_fun = rollapply, 
              width = window,
              FUN = Calculate_rolling_SharpeRatio,
              col_rename = "rolling_sr") %>%
    
    select(-returns) %>%
    na.omit()

rolling_sr_tbl
## # A tibble: 37 × 2
##    date       rolling_sr
##    <date>          <dbl>
##  1 2014-12-31      0.650
##  2 2015-01-30      0.608
##  3 2015-02-27      0.643
##  4 2015-03-31      0.529
##  5 2015-04-30      0.530
##  6 2015-05-29      0.502
##  7 2015-06-30      0.524
##  8 2015-07-31      0.504
##  9 2015-08-31      0.442
## 10 2015-09-30      0.409
## # … with 27 more rows
rolling_sr_tbl %>%
    
    ggplot(aes(x = date, y = rolling_sr)) +
    geom_line(color = "cornflowerblue") +
    
    # Labeling
    labs(x = NULL, y = "Rolling Sharpe Ratio") +
    
    annotate(geom = "text", x = as.Date("2016-06-01"), y = 0.6,
             label = "My Portfolio Has Done Well Since Late 2016.", color = "purple", size = 5)

How has your portfolio performed over time? Provide dates of the structural breaks, if any. The Code Along Assignment 9 had one structural break in November 2016. What do you think the reason is?

My portfolio had a steady drop off starting around 2015. The lowest structural break happened in June of 2016. Ever since that time the portfolio has seemingly never looked back and has kept growing slowly. All of my stocks are tech related. There are many reasons as to why this fall off could have occurred in my portfolio. Personally I think the stocks were just going through a rough period and all five of the stocks seemed to drop at once. Ever since 2017 the portfolio has been doing well and is on pace to keep going up.