Goal

Calculate and visualize your portfolio’s beta.

Choose your stocks and the baseline market.

from 2012-12-31 to present

1 Import stock prices

2 Convert prices to returns (monthly)

3 Assign a weight to each asset (change the weigting scheme)

## [1] "AMZN" "GOOG" "NFLX"
## [1] 0.4 0.3 0.3
## # A tibble: 3 × 2
##   symbols weights
##   <chr>     <dbl>
## 1 AMZN        0.4
## 2 GOOG        0.3
## 3 NFLX        0.3

4 Build a portfolio

## # A tibble: 60 × 2
##    date        returns
##    <date>        <dbl>
##  1 2013-01-31  0.216  
##  2 2013-02-28  0.0545 
##  3 2013-03-28  0.00262
##  4 2013-04-30  0.0315 
##  5 2013-05-31  0.0539 
##  6 2013-06-28 -0.00525
##  7 2013-07-31  0.0791 
##  8 2013-08-30  0.00290
##  9 2013-09-30  0.0784 
## 10 2013-10-31  0.122  
## # … with 50 more rows

5 Calculate CAPM Beta

5.1 Get market returns

5.2 Join returns

5.3 CAPM Beta

## # A tibble: 1 × 1
##   CAPM.beta.1
##         <dbl>
## 1        1.22

6 Plot: Scatter with regression line

How sensitive is your portfolio to the market? Discuss in terms of the beta coefficient. Does the plot confirm the beta coefficient you calculated?

My portfolio is not very in line with the market as the beta coefficient is calculated at 1.22 which is above the market average by 22 basis points. The portfolio is much more volatile than the market and it shows on the graph. The line is not very 45 meaning there is no 1:1 ratio with each set of data. The plot definitely confirms the beta coefficient calculated.