# Load packages

# Core
library(tidyverse)
library(tidyquant)

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, 
                 get  = "stock.prices",
                 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(.25, .25, .2, .2, .1)
weights
## [1] 0.25 0.25 0.20 0.20 0.10
w_tble <- tibble(symbols, weights)
w_tble
## # A tibble: 5 × 2
##   symbols weights
##   <chr>     <dbl>
## 1 AGG        0.25
## 2 EEM        0.25
## 3 EFA        0.2 
## 4 IJS        0.2 
## 5 SPY        0.1

4 Build a portfolio

portfolio_returns_tbl <- asset_returns_tbl %>%
    
    tq_portfolio(assets_col = asset, 
                 returns_col = returns,
                 weights = w_tble, 
                 rebalance_on ="months", 
                 col_rename = "Returns")

portfolio_returns_tbl
## # A tibble: 60 × 2
##    date        Returns
##    <date>        <dbl>
##  1 2013-01-31  0.0204 
##  2 2013-02-28 -0.00239
##  3 2013-03-28  0.0121 
##  4 2013-04-30  0.0174 
##  5 2013-05-31 -0.0128 
##  6 2013-06-28 -0.0247 
##  7 2013-07-31  0.0321 
##  8 2013-08-30 -0.0224 
##  9 2013-09-30  0.0511 
## 10 2013-10-31  0.0301 
## # … with 50 more rows

5 Calculate Standard Deviation

portfolio_skew_tidyquant_builtin_percent <- portfolio_returns_tbl %>%
    
    tq_performance(Ra = Returns, 
                   performance_fun = table.Stats) %>%
    
    select(Skewness)

portfolio_skew_tidyquant_builtin_percent
## # A tibble: 1 × 1
##   Skewness
##      <dbl>
## 1   -0.168

6 Plot

Histogram of Expected Returns and Risk

sd_portfolio <- sd(portfolio_returns_tbl$Returns)
mean_portfolio <- mean(portfolio_returns_tbl$Returns)

portfolio_returns_tbl%>%
    #Add a new Variable
    mutate(extreme_neg = ifelse(Returns < mean_portfolio - 2 * sd_portfolio,
                                "ext_neg",
                                "not_ext_neg"))%>%

    ggplot(aes(x = Returns, fill = extreme_neg)) +
    geom_histogram(binwidth = 0.003) +
    
    scale_x_continuous(breaks = seq(-0.06,0.06,0.02)) +
    
    labs(x = "monthly returns")

Scatterplot of skewness comparison

# Data transformation: calculate skewness
asset_skewness_tbl <- asset_returns_tbl %>%
    
    group_by(asset) %>%
    summarise(skew = skewness(returns)) %>%
    ungroup() %>%
    
    # Add portfolio skewness
    add_row(tibble(asset = "Portfolio",
                   skew  = skewness(portfolio_returns_tbl$Returns)))

asset_skewness_tbl
## # A tibble: 6 × 2
##   asset        skew
##   <chr>       <dbl>
## 1 AGG       -0.599 
## 2 EEM       -0.0512
## 3 EFA       -0.142 
## 4 IJS        0.216 
## 5 SPY       -0.264 
## 6 Portfolio -0.168
# Plot skewness
asset_skewness_tbl %>%
    
    ggplot(aes(x = asset, y =skew, color = asset)) +
    geom_point() +
    
    ggrepel::geom_text_repel(aes(label = asset), 
                             data = asset_skewness_tbl %>%
                                 filter(asset == "Portfolio")) +
    
    labs(y = "skewness")

Rolling skewness

# Transform data: calculate rolling skew
rolling_skew_tbl <- portfolio_returns_tbl %>%
    
    tq_mutate(select =  Returns, 
              mutate_fun = rollapply, 
              width      = 24,
              FUN        = skewness, 
              col_rename = "Skew" ) %>%
    
    select(-Returns)%>%
    na.omit()

# plot
rolling_skew_tbl %>%
    
    ggplot(aes(x = date, y = Skew)) +
    geom_line(color = "cornflowerblue") +
    
    geom_hline(yintercept = 0, linetype = "dotted", size = 2)+
    
    # Formatting
    scale_y_continuous(limits = c(-1,1), breaks = seq(-1,1,0.2)) +
    theme(plot.title = element_text(hjust = 0.5))+
    
    # Labelling
    labs(y = "Skewness",
         x = NULL,
         title = "Rolling 24-Month Skewness") +
    
    
    annotate(geom = "text", 
             x = as.Date("2016-07-01"), y = 0.8,
             color = "red", size = 5,
             label = str_glue("The 24 month rolling 
skewnesss is positive for about half of the lifetime,
even though the overall skewness is negative"))