# 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

# Choose stocks

symbols <- c("AAPL", "DIS", "NKE", "SBUX", "GE")

prices <- tq_get(x = symbols,
                 get = "stock.prices",
                 from = "2012-12-31",
                 to = "2017-12-31")

2 Convert prices to returns (monthly)

asset_returns_tbl <- prices %>%

    # Calculate monthly returns
    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
symbols <- asset_returns_tbl %>% distinct(asset) %>% pull()
symbols
## [1] "AAPL" "DIS"  "GE"   "NKE"  "SBUX"
# weight
weights <- c(0.25, 
       0.25, 
       0.20, 
       0.20, 
       0.10)
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 AAPL       0.25
## 2 DIS        0.25
## 3 GE         0.2 
## 4 NKE        0.2 
## 5 SBUX       0.1

4 Build a 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  0.00658
##  2 2013-02-28  0.00714
##  3 2013-03-28  0.0296 
##  4 2013-04-30  0.0396 
##  5 2013-05-31  0.0141 
##  6 2013-06-28 -0.0206 
##  7 2013-07-31  0.0549 
##  8 2013-08-30 -0.00593
##  9 2013-09-30  0.0549 
## 10 2013-10-31  0.0700 
## # ℹ 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")
portfolio_SharpeRatio_tbl
## # A tibble: 1 × 1
##   `StdDevSharpe(Rf=0%,p=95%)`
##                         <dbl>
## 1                       0.315

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      0.590
##  2 2015-01-30      0.568
##  3 2015-02-27      0.619
##  4 2015-03-31      0.570
##  5 2015-04-30      0.562
##  6 2015-05-29      0.577
##  7 2015-06-30      0.627
##  8 2015-07-31      0.601
##  9 2015-08-31      0.452
## 10 2015-09-30      0.428
## # ℹ 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 = 0.5,
             label = "this portfolio has done 
                        quite poor since 2015",
             color = "red", size = 5)

How has your portfolio performed over time?

The Portfolio has performed pretty poor from 2015 all the way to 2018.

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?

There were no structural breaks, it was a pretty consistent downward slope all the way to 2018. There is a possibility that right before 2015 was my structural break.