Week 14: Code along 12
CHAPTER 10 Component Contribution to Standard Deviation
Daniel Lee
2022-09-19
Goal
Examine how each asset contributes to portfolio standard deviation. This is to ensure that our risk is not concentrated in any one asset.
five stocks: “SPY”, “EFA”, “IJS”, “EEM”, “AGG” from 2012-12-31 to 2017-12-31
1 Import stock prices
2 Convert prices to returns
3 Component Contribution Step-by-Step
Refresh your memory on covariance with this video. Click this link Refresh your memory on matrix multiplication. Click this link
## AGG EEM EFA IJS SPY
## 2013-01-31 -0.0062316551 -0.0029354222 0.0366062037 0.052133732 0.0499230718
## 2013-02-28 0.0058907548 -0.0231051588 -0.0129692061 0.016174891 0.0126779305
## 2013-03-28 0.0009850269 -0.0102352080 0.0129692061 0.040258320 0.0372681113
## 2013-04-30 0.0096396752 0.0120846801 0.0489677865 0.001222503 0.0190302759
## 2013-05-31 -0.0202138333 -0.0494834467 -0.0306555382 0.041976445 0.0233352820
## 2013-06-28 -0.0157785291 -0.0547281812 -0.0271445478 -0.001403367 -0.0134343231
## 2013-07-31 0.0026876340 0.0131597008 0.0518603537 0.063541626 0.0503857469
## 2013-08-30 -0.0082979505 -0.0257058602 -0.0197463914 -0.034743705 -0.0304508509
## 2013-09-30 0.0111437253 0.0695889719 0.0753385112 0.063873820 0.0311555894
## 2013-10-31 0.0082918617 0.0408613927 0.0320817453 0.034234317 0.0452664923
## 2013-11-29 -0.0025089217 -0.0025941820 0.0054496390 0.041660752 0.0292072359
## 2013-12-31 -0.0055837004 -0.0040741618 0.0215281014 0.012892061 0.0255962451
## 2014-01-31 0.0152918417 -0.0903224023 -0.0534133225 -0.035775154 -0.0358846868
## 2014-02-28 0.0037568462 0.0332201067 0.0595049838 0.045257598 0.0445102914
## 2014-03-31 -0.0014814199 0.0380220682 -0.0046025007 0.013315163 0.0082614669
## 2014-04-30 0.0081830548 0.0077726495 0.0165294580 -0.023184353 0.0069273136
## 2014-05-30 0.0117211251 0.0290908861 0.0158284553 0.006205631 0.0229411849
## 2014-06-30 -0.0005759558 0.0237340514 0.0091654429 0.037718471 0.0204346984
## 2014-07-31 -0.0025115552 0.0135556258 -0.0263800316 -0.052009337 -0.0135284920
## 2014-08-29 0.0114306567 0.0279046178 0.0018003564 0.043657933 0.0387045792
## 2014-09-30 -0.0061672703 -0.0808568044 -0.0395983315 -0.061260521 -0.0138923025
## 2014-10-31 0.0105848483 0.0140966491 -0.0026547278 0.068874854 0.0232775445
## 2014-11-28 0.0065484085 -0.0155413696 0.0006253064 0.004773575 0.0271015391
## 2014-12-31 0.0014748582 -0.0404420590 -0.0407467669 0.025295766 -0.0025397328
## 2015-01-30 0.0203152063 -0.0068956998 0.0062266715 -0.054628025 -0.0300771149
## 2015-02-27 -0.0089873654 0.0431360321 0.0614503653 0.056914665 0.0546816792
## 2015-03-31 0.0037396357 -0.0150863650 -0.0143886912 0.010156689 -0.0158300269
## 2015-04-30 -0.0032332954 0.0662812915 0.0358165924 -0.018417809 0.0097860649
## 2015-05-29 -0.0043835916 -0.0419108359 0.0019526185 0.007509937 0.0127741444
## 2015-06-30 -0.0108253425 -0.0297467851 -0.0316788464 0.004171417 -0.0205214048
## 2015-07-31 0.0085846395 -0.0651782553 0.0201144831 -0.027375478 0.0223379434
## 2015-08-31 -0.0033633400 -0.0925121950 -0.0771523528 -0.047268441 -0.0628867614
## 2015-09-30 0.0080811856 -0.0318247731 -0.0451949032 -0.038464608 -0.0258469120
## 2015-10-30 0.0006852839 0.0618081720 0.0640259263 0.063589500 0.0816351047
## 2015-11-30 -0.0038980834 -0.0255604196 -0.0075558630 0.024415113 0.0036483839
## 2015-12-31 -0.0019185707 -0.0389471022 -0.0235952440 -0.052156815 -0.0174338815
## 2016-01-29 0.0123295421 -0.0516367176 -0.0567577056 -0.060306851 -0.0510685335
## 2016-02-29 0.0088316507 -0.0082115806 -0.0339139922 0.020605179 -0.0008263966
## 2016-03-31 0.0087087394 0.1218790120 0.0637458825 0.089910420 0.0651000990
## 2016-04-29 0.0025460918 0.0040794006 0.0219750404 0.021044099 0.0039337106
## 2016-05-31 0.0001356852 -0.0376286833 -0.0008561489 0.004397250 0.0168685320
## 2016-06-30 0.0191669028 0.0445825140 -0.0244913638 0.008292162 0.0034698408
## 2016-07-29 0.0054296792 0.0524420803 0.0390000020 0.049348576 0.0358217871
## 2016-08-31 -0.0021566191 0.0087984034 0.0053270322 0.011260927 0.0011966870
## 2016-09-30 0.0005162381 0.0248730372 0.0132790819 0.008614681 0.0000582738
## 2016-10-31 -0.0082056187 -0.0083120224 -0.0224036854 -0.038134706 -0.0174892507
## 2016-11-30 -0.0259898225 -0.0451619535 -0.0179744392 0.125246080 0.0361762256
## 2016-12-30 0.0025382815 -0.0025300063 0.0267028685 0.031492152 0.0200690500
## 2017-01-31 0.0021264319 0.0644313946 0.0323818409 -0.012144047 0.0177364439
## 2017-02-28 0.0064377992 0.0172579327 0.0118364457 0.013428988 0.0385392318
## 2017-03-31 -0.0005527346 0.0361889260 0.0318057581 -0.006533282 0.0012490298
## 2017-04-28 0.0090292586 0.0168663793 0.0239522284 0.005107939 0.0098773713
## 2017-05-31 0.0068472198 0.0280598590 0.0348101417 -0.022862779 0.0140144061
## 2017-06-30 -0.0001827094 0.0092236764 0.0029559199 0.029151704 0.0063546462
## 2017-07-31 0.0033345755 0.0565946646 0.0261881167 0.007481694 0.0203456415
## 2017-08-31 0.0093691455 0.0232437207 -0.0004484897 -0.027564671 0.0029135352
## 2017-09-29 -0.0057322232 -0.0004460976 0.0233428581 0.082321698 0.0199492172
## 2017-10-31 0.0009780400 0.0322784411 0.0166535066 0.005915878 0.0232905929
## 2017-11-30 -0.0014841701 -0.0038969361 0.0068700936 0.036913405 0.0301079992
## 2017-12-29 0.0047404173 0.0369253499 0.0133983344 -0.003731148 0.0120549004## AGG EEM EFA IJS SPY
## AGG 7.398340e-05 0.0001042099 4.178242e-05 -7.812004e-05 -9.031898e-06
## EEM 1.042099e-04 0.0017547097 1.039016e-03 6.437740e-04 6.795412e-04
## EFA 4.178242e-05 0.0010390158 1.064237e-03 6.490309e-04 6.975398e-04
## IJS -7.812004e-05 0.0006437740 6.490309e-04 1.565450e-03 8.290248e-04
## SPY -9.031898e-06 0.0006795412 6.975398e-04 8.290248e-04 7.408276e-04## [,1]
## [1,] 0.0234749## AGG EEM EFA IJS SPY
## [1,] 0.0003874097 0.009257141 0.005815633 0.005684473 0.002330246## [1] 0.0234749## # A tibble: 1 × 5
## AGG EEM EFA IJS SPY
## <dbl> <dbl> <dbl> <dbl> <dbl>
## 1 0.017 0.394 0.248 0.242 0.099## # A tibble: 5 × 2
## asset contribution
## <chr> <dbl>
## 1 AGG 0.017
## 2 EEM 0.394
## 3 EFA 0.248
## 4 IJS 0.242
## 5 SPY 0.0994 Component Contribution with a Custom Function
## AGG EEM EFA IJS SPY
## 2013-01-31 -0.0062316551 -0.0029354222 0.0366062037 0.052133732 0.0499230718
## 2013-02-28 0.0058907548 -0.0231051588 -0.0129692061 0.016174891 0.0126779305
## 2013-03-28 0.0009850269 -0.0102352080 0.0129692061 0.040258320 0.0372681113
## 2013-04-30 0.0096396752 0.0120846801 0.0489677865 0.001222503 0.0190302759
## 2013-05-31 -0.0202138333 -0.0494834467 -0.0306555382 0.041976445 0.0233352820
## 2013-06-28 -0.0157785291 -0.0547281812 -0.0271445478 -0.001403367 -0.0134343231
## 2013-07-31 0.0026876340 0.0131597008 0.0518603537 0.063541626 0.0503857469
## 2013-08-30 -0.0082979505 -0.0257058602 -0.0197463914 -0.034743705 -0.0304508509
## 2013-09-30 0.0111437253 0.0695889719 0.0753385112 0.063873820 0.0311555894
## 2013-10-31 0.0082918617 0.0408613927 0.0320817453 0.034234317 0.0452664923
## 2013-11-29 -0.0025089217 -0.0025941820 0.0054496390 0.041660752 0.0292072359
## 2013-12-31 -0.0055837004 -0.0040741618 0.0215281014 0.012892061 0.0255962451
## 2014-01-31 0.0152918417 -0.0903224023 -0.0534133225 -0.035775154 -0.0358846868
## 2014-02-28 0.0037568462 0.0332201067 0.0595049838 0.045257598 0.0445102914
## 2014-03-31 -0.0014814199 0.0380220682 -0.0046025007 0.013315163 0.0082614669
## 2014-04-30 0.0081830548 0.0077726495 0.0165294580 -0.023184353 0.0069273136
## 2014-05-30 0.0117211251 0.0290908861 0.0158284553 0.006205631 0.0229411849
## 2014-06-30 -0.0005759558 0.0237340514 0.0091654429 0.037718471 0.0204346984
## 2014-07-31 -0.0025115552 0.0135556258 -0.0263800316 -0.052009337 -0.0135284920
## 2014-08-29 0.0114306567 0.0279046178 0.0018003564 0.043657933 0.0387045792
## 2014-09-30 -0.0061672703 -0.0808568044 -0.0395983315 -0.061260521 -0.0138923025
## 2014-10-31 0.0105848483 0.0140966491 -0.0026547278 0.068874854 0.0232775445
## 2014-11-28 0.0065484085 -0.0155413696 0.0006253064 0.004773575 0.0271015391
## 2014-12-31 0.0014748582 -0.0404420590 -0.0407467669 0.025295766 -0.0025397328
## 2015-01-30 0.0203152063 -0.0068956998 0.0062266715 -0.054628025 -0.0300771149
## 2015-02-27 -0.0089873654 0.0431360321 0.0614503653 0.056914665 0.0546816792
## 2015-03-31 0.0037396357 -0.0150863650 -0.0143886912 0.010156689 -0.0158300269
## 2015-04-30 -0.0032332954 0.0662812915 0.0358165924 -0.018417809 0.0097860649
## 2015-05-29 -0.0043835916 -0.0419108359 0.0019526185 0.007509937 0.0127741444
## 2015-06-30 -0.0108253425 -0.0297467851 -0.0316788464 0.004171417 -0.0205214048
## 2015-07-31 0.0085846395 -0.0651782553 0.0201144831 -0.027375478 0.0223379434
## 2015-08-31 -0.0033633400 -0.0925121950 -0.0771523528 -0.047268441 -0.0628867614
## 2015-09-30 0.0080811856 -0.0318247731 -0.0451949032 -0.038464608 -0.0258469120
## 2015-10-30 0.0006852839 0.0618081720 0.0640259263 0.063589500 0.0816351047
## 2015-11-30 -0.0038980834 -0.0255604196 -0.0075558630 0.024415113 0.0036483839
## 2015-12-31 -0.0019185707 -0.0389471022 -0.0235952440 -0.052156815 -0.0174338815
## 2016-01-29 0.0123295421 -0.0516367176 -0.0567577056 -0.060306851 -0.0510685335
## 2016-02-29 0.0088316507 -0.0082115806 -0.0339139922 0.020605179 -0.0008263966
## 2016-03-31 0.0087087394 0.1218790120 0.0637458825 0.089910420 0.0651000990
## 2016-04-29 0.0025460918 0.0040794006 0.0219750404 0.021044099 0.0039337106
## 2016-05-31 0.0001356852 -0.0376286833 -0.0008561489 0.004397250 0.0168685320
## 2016-06-30 0.0191669028 0.0445825140 -0.0244913638 0.008292162 0.0034698408
## 2016-07-29 0.0054296792 0.0524420803 0.0390000020 0.049348576 0.0358217871
## 2016-08-31 -0.0021566191 0.0087984034 0.0053270322 0.011260927 0.0011966870
## 2016-09-30 0.0005162381 0.0248730372 0.0132790819 0.008614681 0.0000582738
## 2016-10-31 -0.0082056187 -0.0083120224 -0.0224036854 -0.038134706 -0.0174892507
## 2016-11-30 -0.0259898225 -0.0451619535 -0.0179744392 0.125246080 0.0361762256
## 2016-12-30 0.0025382815 -0.0025300063 0.0267028685 0.031492152 0.0200690500
## 2017-01-31 0.0021264319 0.0644313946 0.0323818409 -0.012144047 0.0177364439
## 2017-02-28 0.0064377992 0.0172579327 0.0118364457 0.013428988 0.0385392318
## 2017-03-31 -0.0005527346 0.0361889260 0.0318057581 -0.006533282 0.0012490298
## 2017-04-28 0.0090292586 0.0168663793 0.0239522284 0.005107939 0.0098773713
## 2017-05-31 0.0068472198 0.0280598590 0.0348101417 -0.022862779 0.0140144061
## 2017-06-30 -0.0001827094 0.0092236764 0.0029559199 0.029151704 0.0063546462
## 2017-07-31 0.0033345755 0.0565946646 0.0261881167 0.007481694 0.0203456415
## 2017-08-31 0.0093691455 0.0232437207 -0.0004484897 -0.027564671 0.0029135352
## 2017-09-29 -0.0057322232 -0.0004460976 0.0233428581 0.082321698 0.0199492172
## 2017-10-31 0.0009780400 0.0322784411 0.0166535066 0.005915878 0.0232905929
## 2017-11-30 -0.0014841701 -0.0038969361 0.0068700936 0.036913405 0.0301079992
## 2017-12-29 0.0047404173 0.0369253499 0.0133983344 -0.003731148 0.0120549004## # A tibble: 1 × 5
## AGG EEM EFA IJS SPY
## <dbl> <dbl> <dbl> <dbl> <dbl>
## 1 0.017 0.394 0.248 0.242 0.0995 Visualizing Component Contribution
6 Column Chart of Component Contribution and Weight
