# Load packages

# Core
library(tidyverse)
library(tidyquant)

Goal

Visualize and examine changes in the underlying trend in the downside risk of your portfolio in terms of kurtosis.

Choose your stocks.

from 2012-12-31 to present

1 Import stock prices

symbols <- c("F", "RIVN", "LCID", "TM", "HMC")

prices <- tq_get(x    = symbols,
                 get  = "stock.prices",    
                 from = "2019-12-31",
                 to   = "2024-12-31")

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
symbols <- asset_returns_tbl %>% distinct(asset) %>% pull()
symbols
## [1] "F"    "HMC"  "LCID" "RIVN" "TM"
# 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 F          0.25
## 2 HMC        0.25
## 3 LCID       0.2 
## 4 RIVN       0.2 
## 5 TM         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 2020-01-31 -0.0354 
##  2 2020-02-28 -0.0646 
##  3 2020-03-31 -0.129  
##  4 2020-04-30  0.0332 
##  5 2020-05-29  0.0506 
##  6 2020-06-30  0.0114 
##  7 2020-07-31  0.00363
##  8 2020-08-31  0.0305 
##  9 2020-09-30 -0.0219 
## 10 2020-10-30  0.0324 
## # ℹ 50 more rows

5 Compute kurtosis

library(PerformanceAnalytics)

# Compute overall kurtosis of the portfolio returns
portfolio_kurtosis <- portfolio_returns_tbl %>%
    summarise(kurtosis = kurtosis(returns))

# Display result
portfolio_kurtosis
## # A tibble: 1 × 1
##   kurtosis
##      <dbl>
## 1  -0.0698
cat("The portfolio kurtosis over the entire period is:",
    round(portfolio_kurtosis$kurtosis, 2))
## The portfolio kurtosis over the entire period is: -0.07

6 Plot: Rolling kurtosis

# 3 Rolling kurtosis ----

# Assign a value to winder
window <- 24

port_rolling_kurtosis_tbl <- portfolio_returns_tbl %>%

    tq_mutate(select = returns,
              mutate_fun = rollapply,
              width      = window,
              FUN        = kurtosis,
              col_rename = "rolling_kurtosis") %>%
    select(date, rolling_kurtosis) %>%
    na.omit()

# Figure 6.5 Rolling kurtosis ggplot ----

port_rolling_kurtosis_tbl %>%

    ggplot(aes(date, rolling_kurtosis)) +
    geom_line(color = "cornflowerblue") +

    scale_y_continuous(breaks = scales::pretty_breaks(n = 10)) +
    scale_x_date(breaks = scales::breaks_pretty(n = 7)) +

    labs(title = paste0("Rolling ", window, "-Month Kurtosis"),
         x = NULL,
         y = "kurtosis") +
    theme(plot.title = element_text(hjust = 0.5)) +

    annotate(geom = "text",
             x = as.Date("2016-12-01"), y = 3,
             color = "red", size = 5,
             label = str_glue("The risk level skyrocketed at the end of the period
                              with the 24-month kurtosis rising above three."))

Has the downside risk of your portfolio increased or decreased over time? Explain using the plot you created. You may also refer to the skewness of the returns distribution you plotted in the previous assignment.