Goal

Visualize and compare skewness of your portfolio and its assets.

Choose your stocks.

from 2012-12-31 to 2017-12-31

1 Import stock prices

2 Convert prices to returns

3 Assign a weight to each asset

## [1] "AMZN" "TM"   "TSLA"
## [1] 0.50 0.25 0.25
## # A tibble: 3 × 2
##   symbols weights
##   <chr>     <dbl>
## 1 AMZN       0.5 
## 2 TM         0.25
## 3 TSLA       0.25

4 Build a portfolio

## # A tibble: 60 × 2
##    date        returns
##    <date>        <dbl>
##  1 2013-01-31  0.0595 
##  2 2013-02-28 -0.00259
##  3 2013-03-28  0.0284 
##  4 2013-04-30  0.0954 
##  5 2013-05-31  0.181  
##  6 2013-06-28  0.0455 
##  7 2013-07-31  0.0992 
##  8 2013-08-30  0.0204 
##  9 2013-09-30  0.104  
## 10 2013-10-31  0.0313 
## # ℹ 50 more rows

5 Calculate Skewness

## # A tibble: 1 × 1
##   Skewness
##      <dbl>
## 1   -0.138

6 Plot

Is any asset in your portfolio more likely to return extreme positive returns than your portfolio collectively? Discuss in terms of skewness. You may also refer to the distribution of returns you plotted in Code along 4.

Skewness is a statistical measure that is used to show whether a distribution is distorted or asymmetrical. I added the chart from apply 4 to allow me to explain myself a little better. Tesla has the highest skewness by a substantial amount. This is because, and if we look at the distribution of quarterly returns, Tesla is very inconsistent with their returns and they vary largely. They are a risky investment as they have returned low returns, but mixed in the right portfolio you can limit that risk to just the market line and roll the dice. If we look at Amazon they have a higher skewness than our portfolio. This is due to the fact that Toyota returns a pretty steady return each quarter. I would argue Amazon is still a very good investment. You are taking on more risk then enjoying my beautiful portfolio, but If you look, Amazon is more skewed to the right (positive side). I am saying majority of their returns are for a gain and they have a much higher ceiling than my portfolio which includes the 1 safety rated Toyota Motors.