# Load packages

# Core
library(tidyverse)
library(tidyquant)
library(ggrepel)
library(zoo)

Goal

Collect individual returns into a portfolio by assigning a weight to each stock

five stocks: “SPY”, “EFA”, “IJS”, “EEM”, “AGG”

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

1 Import stock prices

symbols <- c("SPY", "EFA", "IJS", "EEM", "AGG")

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

2 Convert prices to returns

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

# symbols
symbols <- asset_returns_tbl %>% distinct(asset) %>% pull()
symbols
## [1] "AGG" "EEM" "EFA" "IJS" "SPY"
# 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)

4 Build a portfolio

# ?tq_portfolio

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

portfolio_returns_tbl
## # A tibble: 60 × 2
##    date         returns
##    <date>         <dbl>
##  1 2013-01-31  0.0259  
##  2 2013-02-28 -0.000266
##  3 2013-03-28  0.0162  
##  4 2013-04-30  0.0182  
##  5 2013-05-31 -0.00701 
##  6 2013-06-28 -0.0225  
##  7 2013-07-31  0.0363  
##  8 2013-08-30 -0.0238  
##  9 2013-09-30  0.0502  
## 10 2013-10-31  0.0321  
## # ℹ 50 more rows

5 Calculate Kurtosis

portfolio_kurt_tidyquant_builtin_percent <- portfolio_returns_tbl %>%
    
    tq_performance(Ra = returns, 
                   performance_fun = table.Stats) %>%
    
    select(Kurtosis)

portfolio_kurt_tidyquant_builtin_percent
## # A tibble: 1 × 1
##   Kurtosis
##      <dbl>
## 1    0.454

6 Plot

Distribution of Portfolio Returns

portfolio_returns_tbl %>%
    
    ggplot(aes(x = returns)) +
    geom_histogram()

Expected Return vs Dowside Risk

# Transform data
mean_kurt_tbl <- asset_returns_tbl %>%
    
    # Calculate mean return and kurtosis for assets
    group_by(asset) %>%
    summarise(mean = mean(returns),
              kurt = kurtosis(returns)) %>%
    ungroup() %>%
    
    # Add portfolio stats
    add_row(portfolio_returns_tbl %>%
    summarise(mean = mean(returns),
              kurt = kurtosis(returns)) %>%
    mutate(asset = "Portfolio"))

# Plot 
mean_kurt_tbl %>%
    
    ggplot(aes(x = kurt, y = mean)) +
    geom_point() +
    ggrepel::geom_text_repel(aes(label = asset, color = asset)) +
    
    # Formatting
    theme(legend.position = "none") +
    scale_y_continuous(labels = scales::percent_format(accuracy = 0.1)) +
    
    # Labeling
    labs(x = "Kurtosis",
         y = "Expected Returns")

Rolling 24 Month Kurtosis

# Assign a value for window
window = 24

# Transform data : calculate 24 month rolling kurtosis
rolling_kurt_tbl <- portfolio_returns_tbl %>%
    
    tq_mutate(select     = returns,
              mutate_fun = rollapply, 
              width      = window,
              FUN        = kurtosis,
              col_rename = "Kurt") %>% 
    
    na.omit() %>%
    select(-returns)

# Plot
rolling_kurt_tbl %>%
    
    ggplot(aes(x = date, y = Kurt)) +
    geom_line(color = "cornflowerblue") +
    
    # Formatting
    scale_y_continuous(breaks = seq(-1,4,0.5)) +
    scale_x_date(breaks = scales::pretty_breaks(n = 7)) +
    theme(plot.title = element_text(hjust = 0.5)) +
    
    # Labeling
    labs(x = NULL,
         y = "Kurtosis",
         title = paste0("Rolling", window, "Monthly Kurtosis")) +
    
    annotate(geom = "text", x = as.Date("2016-07-01"), y = 3,
             size = 5, color = "red",
             label = "Downside rosk skyrocketed towards the end of 2017")