Portfolio Analysis Using Tidyquant

BAN BAYLOR EXAMS?

Key Terms

  • Volatility → how much returns fluctuate
  • Sharpe Ratio → return per unit risk
  • Efficient → best return for risk
  • Inefficient → worse return or higher risk
  • Diversification → spreading risk across assets

The Problem

Investing with Data Instead of Intuition

  • Beginner investors avoid multiple stocks
  • Rely on what “looks right”
  • Price increases mislead return assumptions

Building a Portfolio

  • Each stock contributes differently
  • portfolio = weighted combination of assets

Sharpe Ratio

symbol avg_return volatility sharpe
AAPL 0.0154442 0.0694693 0.222316438976806
KO 0.0096804 0.0480633 0.20140915184649
MSFT 0.0128050 0.0667285 0.1918966237545
XOM 0.0256475 0.0799493 0.320797797885712

Higher Sharpe Ratio = better risk-adjusted performance

Risk vs Return

By using the Share ratio: - the higher the ration = better risk-adjusted return - The main idea to take away from portfolios

The Solution

Diversify across assets instead of betting on one stock.

  • Risk becomes measurable
  • Returns become comparable
  • Decisions become data-driven

Sources

  • Github: https://github.com/business-science/tidyquant
  • My Github: https://github.com/nicrivera7890-spec/lightning-talk