Week 14: Code along 12
CHAPTER 10 Component Contribution to Standard Deviation
Jackson Curtis
2023
Goal
Examine how each asset contributes to portfolio standard deviation. This is to ensure that our risk is not concentrated in any one asset.
five stocks: “SPY”, “EFA”, “IJS”, “EEM”, “AGG” from 2012-12-31 to 2017-12-31
1 Import stock prices
2 Convert prices to returns
3 Component Contribution Step-by-Step
Refresh your memory on covariance with this video. Click this link Refresh your memory on matrix multiplication. Click this link
## AGG EEM EFA IJS SPY
## 2013-01-31 -0.0062317208 -0.0029354875 0.0366061785 0.052133152 4.992317e-02
## 2013-02-28 0.0058917673 -0.0231055142 -0.0129693163 0.016175419 1.267801e-02
## 2013-03-28 0.0009844258 -0.0102347913 0.0129693163 0.040258025 3.726759e-02
## 2013-04-30 0.0096397820 0.0120845233 0.0489676419 0.001222716 1.903076e-02
## 2013-05-31 -0.0202138488 -0.0494830041 -0.0306554780 0.041976226 2.333506e-02
## 2013-06-28 -0.0157785455 -0.0547284133 -0.0271445624 -0.001403280 -1.343440e-02
## 2013-07-31 0.0026875495 0.0131595513 0.0518602842 0.063541386 5.038596e-02
## 2013-08-30 -0.0082975582 -0.0257057192 -0.0197460742 -0.034743448 -3.045106e-02
## 2013-09-30 0.0111434061 0.0695887104 0.0753385162 0.063873838 3.115587e-02
## 2013-10-31 0.0082923395 0.0408613614 0.0320814278 0.034233883 4.526668e-02
## 2013-11-29 -0.0025095216 -0.0025941842 0.0054499821 0.041661167 2.920672e-02
## 2013-12-31 -0.0055836256 -0.0040742983 0.0215277945 0.012892271 2.559648e-02
## 2014-01-31 0.0152918933 -0.0903226418 -0.0534132330 -0.035775137 -3.588482e-02
## 2014-02-28 0.0037566362 0.0332206228 0.0595051302 0.045257127 4.451034e-02
## 2014-03-31 -0.0014816162 0.0380219656 -0.0046025125 0.013315630 8.261086e-03
## 2014-04-30 0.0081829856 0.0077725358 0.0165291560 -0.023184419 6.927493e-03
## 2014-05-30 0.0117221907 0.0290913131 0.0158285988 0.006205167 2.294164e-02
## 2014-06-30 -0.0005756265 0.0237338631 0.0091655874 0.037718747 2.043435e-02
## 2014-07-31 -0.0025124322 0.0135553751 -0.0263800981 -0.052009415 -1.352856e-02
## 2014-08-29 0.0114307138 0.0279047226 0.0018005675 0.043658023 3.870428e-02
## 2014-09-30 -0.0061674251 -0.0808565712 -0.0395984736 -0.061260603 -1.389213e-02
## 2014-10-31 0.0105843038 0.0140964769 -0.0026549788 0.068874664 2.327830e-02
## 2014-11-28 0.0065490887 -0.0155414225 0.0006254683 0.004773972 2.710122e-02
## 2014-12-31 0.0014750789 -0.0404421892 -0.0407467277 0.025295699 -2.539795e-03
## 2015-01-30 0.0203150036 -0.0068956111 0.0062264360 -0.054627808 -3.007693e-02
## 2015-02-27 -0.0089878076 0.0431362635 0.0614504852 0.056914761 5.468175e-02
## 2015-03-31 0.0037401180 -0.0150862293 -0.0143888588 0.010156059 -1.583056e-02
## 2015-04-30 -0.0032332228 0.0662810734 0.0358166858 -0.018417695 9.786010e-03
## 2015-05-29 -0.0043832772 -0.0419107722 0.0019527051 0.007510031 1.277447e-02
## 2015-06-30 -0.0108257018 -0.0297466055 -0.0316788872 0.004171324 -2.052142e-02
## 2015-07-31 0.0085844016 -0.0651783286 0.0201146038 -0.027375337 2.233777e-02
## 2015-08-31 -0.0033635780 -0.0925122576 -0.0771525177 -0.047268509 -6.288648e-02
## 2015-09-30 0.0080816472 -0.0318250977 -0.0451945902 -0.038464844 -2.584702e-02
## 2015-10-30 0.0006855528 0.0618084181 0.0640257751 0.063590009 8.163470e-02
## 2015-11-30 -0.0038984698 -0.0255604343 -0.0075558661 0.024415158 3.648529e-03
## 2015-12-31 -0.0019193765 -0.0389470944 -0.0235951082 -0.052157146 -1.743367e-02
## 2016-01-29 0.0123305884 -0.0516367829 -0.0567577290 -0.060306767 -5.106856e-02
## 2016-02-29 0.0088312454 -0.0082115130 -0.0339139029 0.020605472 -8.263948e-04
## 2016-03-31 0.0087087644 0.1218790090 0.0637453579 0.089910119 6.510029e-02
## 2016-04-29 0.0025462430 0.0040794177 0.0219753987 0.021044191 3.933329e-03
## 2016-05-31 0.0001354593 -0.0376287644 -0.0008559494 0.004397029 1.686854e-02
## 2016-06-30 0.0191671143 0.0445823660 -0.0244918274 0.008292428 3.469966e-03
## 2016-07-29 0.0054294663 0.0524421985 0.0390004318 0.049348227 3.582191e-02
## 2016-08-31 -0.0021568129 0.0087987457 0.0053266538 0.011261073 1.196874e-03
## 2016-09-30 0.0005166061 0.0248727001 0.0132793618 0.008614669 5.807384e-05
## 2016-10-31 -0.0082048149 -0.0083121374 -0.0224039034 -0.038134971 -1.748916e-02
## 2016-11-30 -0.0259901973 -0.0451619191 -0.0179742849 0.125246644 3.617609e-02
## 2016-12-30 0.0025378434 -0.0025300012 0.0267028218 0.031491637 2.006885e-02
## 2017-01-31 0.0021264818 0.0644313979 0.0323819068 -0.012143552 1.773651e-02
## 2017-02-28 0.0064379418 0.0172580732 0.0118363679 0.013428377 3.853949e-02
## 2017-03-31 -0.0005531263 0.0361886264 0.0318056790 -0.006532612 1.249149e-03
## 2017-04-28 0.0090291335 0.0168667641 0.0239522497 0.005107342 9.877130e-03
## 2017-05-31 0.0068476548 0.0280596317 0.0348102606 -0.022862358 1.401421e-02
## 2017-06-30 -0.0001823759 0.0092241522 0.0029557902 0.029151535 6.354901e-03
## 2017-07-31 0.0033341084 0.0565943065 0.0261881245 0.007481698 2.034567e-02
## 2017-08-31 0.0093692580 0.0232437311 -0.0004483676 -0.027564820 2.913520e-03
## 2017-09-29 -0.0057324633 -0.0004461869 0.0233427076 0.082321968 1.994908e-02
## 2017-10-31 0.0009778076 0.0322785215 0.0166535684 0.005916135 2.329071e-02
## 2017-11-30 -0.0014836443 -0.0038970512 0.0068699273 0.036912840 3.010781e-02
## 2017-12-29 0.0047397500 0.0369254581 0.0133985591 -0.003731158 1.205525e-02## AGG EEM EFA IJS SPY
## AGG 7.398493e-05 0.0001042088 4.178053e-05 -7.812289e-05 -9.032626e-06
## EEM 1.042088e-04 0.0017547096 1.039015e-03 6.437759e-04 6.795436e-04
## EFA 4.178053e-05 0.0010390153 1.064236e-03 6.490303e-04 6.975404e-04
## IJS -7.812289e-05 0.0006437759 6.490303e-04 1.565450e-03 8.290235e-04
## SPY -9.032626e-06 0.0006795436 6.975404e-04 8.290235e-04 7.408272e-04## [,1]
## [1,] 0.02347489## AGG EEM EFA IJS SPY
## [1,] 0.0003874001 0.009257147 0.005815629 0.00568447 0.002330248## [1] 0.02347489## # A tibble: 1 × 5
## AGG EEM EFA IJS SPY
## <dbl> <dbl> <dbl> <dbl> <dbl>
## 1 0.017 0.394 0.248 0.242 0.099## # A tibble: 5 × 2
## asset contribution
## <chr> <dbl>
## 1 AGG 0.017
## 2 EEM 0.394
## 3 EFA 0.248
## 4 IJS 0.242
## 5 SPY 0.0994 Component Contribution with a Custom Function
## # A tibble: 1 × 5
## AGG EEM EFA IJS SPY
## <dbl> <dbl> <dbl> <dbl> <dbl>
## 1 0.017 0.394 0.248 0.242 0.0995 Visualizing Component Contribution
