Portfolio Construction & Optimization (Python) Simulator Analytics

05/09/2021 Portfolio Construction & Optimization { Python } | Simulator | Analytics | Engine - Jupyter Notebook 05/09/2021 Portfolio Construction &
gine - Jupyter Notebook 05/09/2021 Portfolio Construction & Optimization { Python } | Simulator | Analytics | Engine - Jupyter Notebook
In [3]: 1 # ticker list

2 s_ticker_list = ["ADANIPORTS","ASIANPAINT","AXISBANK","BAJAJ-AUTO","BAJAJFINSV","BAJFINANCE","BHARTIARTL",
Portfolio Construction & Optimization { Python } 3
4
"BPCL","BRITANNIA","CIPLA","COALINDIA","DIVISLAB","DRREDDY","EICHERMOT","GRASIM","HCLTECH"
"HDFC","HDFCBANK","HDFCLIFE","HEROMOTOCO","HINDALCO","HINDUNILVR","ICICIBANK","INDUSINDBK"
5 "INFY","IOC","ITC","JSWSTEEL","KOTAKBANK","LT","M&M","MARUTI","NESTLEIND","NTPC","ONGC",
In [ ]: 1 6 "POWERGRID","RELIANCE","SBILIFE","SBIN","SHREECEM","SUNPHARMA","TATACONSUM","TATAMOTORS",
7 "TATASTEEL","TCS","TECHM","TITAN","ULTRACEMCO","UPL","WIPRO"]
8 b_ticker = "NIFTY"
In [ ]: 1
9
10 # other inputs
In [ ]: 1 11 rf = 0.06
12 time = 252
13 simulations = 1000
Importing Libraries 14 investment = 1000000
15
16 # cob dates
In [1]: 1 import pandas as pd
17 start_date = date(2017,1,1)
2 import numpy as np
18 end_date = date(2019,12,31)
3 from nsepy import get_history
4 from datetime import date, timedelta
5 import matplotlib.pyplot as plt
Extract Data
In [2]: 1 %matplotlib inline
In [4]: 1 #creating an empty dataframe & dictionary
2 s_ticker_spot_hist_dc = pd.DataFrame()
Feeder Pack 3 s_ticker_spot_hist_dc = {}
4 b_ticker_spot_hist_df = pd.DataFrame()
5
6 for item in s_ticker_list:
7 s_ticker_spot_hist_dc[item] = get_history(symbol=item, start=start_date, end=end_date)
8 s_ticker_spot_hist_dc[item]['%Change'] = s_ticker_spot_hist_dc[item]['Close'].pct_change().fillna(0)
9
10 b_ticker_spot_hist_df = get_history(symbol=b_ticker, start=start_date, end=end_date, index=True)
11 b_ticker_spot_hist_df['%Change'] = b_ticker_spot_hist_df['Close'].pct_change().fillna(0)
localhost:8888/notebooks/Desktop/Projects/Programming/Python/Portfolio Construction %26 Optimization %7B Python %7D %7C Simulator %7C Analytics %7C Engine.ipynb 1/23 localhost:8888/notebooks/Desktop/Projects/Programming/Python/Portfolio Construction %26 Optimization %7B Python %7D %7C Simulator %7C Analytics %7C Engine.ipynb 2/23
05/09/2021 Portfolio Construction & Optimization { Python } | Simulator | Analytics | Engine - Jupyter Notebook 05/09/2021 Portfolio Construction & Optimization { Python } | Simulator | Analytics | Engine - Jupyter Notebook
In [5]: 1 s_ticker_spot_hist_dc['HDFCLIFE'] In [6]: 1 b_ticker_spot_hist_df
Out[5]: Out[6]:
Prev Deliverable Open High Low Close Volume Turnover %Change
Symbol Series Open High Low Last Close VWAP Volume Turnover Trades %Deliverble %Chang
Close Volume
Date
Date
2017-01-02 8210.10 8212.00 8133.80 8179.50 122016111 5.255490e+10 0.000000
2017-
HDFCLIFE EQ 290.00 310.0 369.00 307.00 343.90 344.60 327.26 168836552 5.525288e+15 1177530 82044782 0.4859 0.00000 2017-01-03 8196.05 8219.10 8148.60 8192.25 131186021 6.053670e+10 0.001559
11-17
2017- 2017-01-04 8202.65 8218.50 8180.90 8190.50 136476345 6.543130e+10 -0.000214

HDFCLIFE EQ 344.60 344.7 358.90 344.00 355.00 355.35 353.18 14650240 5.174106e+14 166263 6761287 0.4615 0.03119
11-20
2017-01-05 8226.65 8282.65 8223.70 8273.80 163957452 8.180680e+10 0.010170
2017-
HDFCLIFE EQ 355.35 356.4 418.90 352.50 386.90 385.30 389.24 43078194 1.676786e+15 450090 11584111 0.2689 0.08428 2017-01-06 8281.85 8306.85 8233.25 8243.80 143689850 7.298740e+10 -0.003626
11-21
... ... ... ... ... ... ... ...
2017-
HDFCLIFE EQ 385.30 388.0 408.00 386.90 394.00 395.20 397.38 15227642 6.051231e+14 166870 3475999 0.2283 0.02569
11-22 12269.25 12283.70 12202.10 12214.55 470290298 1.386456e+11 -0.003931
2019-12-24
2017- 12211.85 12221.55 12118.85 12126.55 520326632 1.636231e+11 -0.007205
HDFCLIFE EQ 395.20 390.0 392.00 371.10 375.50 374.85 379.99 12300150 4.673873e+14 124472 6200309 0.5041 -0.05149 2019-12-26
11-23
2019-12-27 12172.90 12258.45 12157.90 12245.80 383788556 1.367620e+11 0.009834
... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
2019-12-30 12274.90 12286.45 12213.80 12255.85 411084614 1.455673e+11 0.000821
2019-
HDFCLIFE EQ 616.15 618.1 627.60 613.40 624.50 625.30 621.48 2938173 1.826018e+14 63620 1429838 0.4866 0.01485
12-24 2019-12-31 12247.10 12247.10 12151.80 12168.45 426931711 1.481289e+11 -0.007131
2019-
HDFCLIFE EQ 625.30 627.9 639.00 623.10 636.60 635.60 631.25 3006668 1.897949e+14 58982 1433743 0.4769 0.01647
12-26 739 rows × 7 columns
2019-
HDFCLIFE EQ 635.60 639.0 639.00 628.55 630.05 631.40 631.79 2494965 1.576282e+14 72563 1514619 0.6071 -0.00660
12-27
2019- Risk (Standard Deviation) & Return (Mean) - Stocks | Benchmark

HDFCLIFE EQ 631.40 632.7 638.75 629.00 636.95 636.15 632.89 1799682 1.139002e+14 37683 1176305 0.6536 0.00752
12-30
2019- In [7]: 1 print("Benchmark Mean Return :", b_ticker_spot_hist_df['%Change'].mean()*time)

HDFCLIFE EQ 636.15 637.9 646.00 620.75 622.50 626.05 634.34 2217822 1.406856e+14 44539 960791 0.4332 -0.01587
12-31 2 print("Benchmark SD. :", b_ticker_spot_hist_df['%Change'].std()*np.sqrt(time))
521 rows × 15 columns Benchmark Mean Return : 0.14273263200168973

Benchmark SD. : 0.12061193399492835
In [8]: 1 s_ticker_ret_hist_df = pd.DataFrame() In [9]: 1 b_ret = b_ticker_spot_hist_df['%Change'][1:].mean()*time

2 s_ticker_rr_profile_df = pd.DataFrame() 2 b_sd = b_ticker_spot_hist_df['%Change'][1:].std()*np.sqrt(time)
3 3 b_sr = (b_ret - rf) / b_sd
4 for item in s_ticker_list: 4 b_portf_ret = b_ret * investment
5 s_ticker_ret_hist_df[item] = s_ticker_spot_hist_dc[item]["%Change"] 5 b_portf_sd = b_sd * investment
6 temp = pd.DataFrame({ 6
7 "Mean": s_ticker_ret_hist_df[item].mean()*time, 7 print("Investment :", investment)
8 "SD": s_ticker_ret_hist_df[item].std()*np.sqrt(time) 8 print("Benchmark Return:", b_portf_ret)
9 },index=[item]) 9 print("Benchmark SD :", b_portf_sd)
10 s_ticker_rr_profile_df = s_ticker_rr_profile_df.append(temp)
11 s_ticker_ret_hist_df = s_ticker_ret_hist_df.fillna(0) Investment : 1000000
12 s_ticker_rr_profile_df Benchmark Return: 142926.03665209853
Benchmark SD : 120693.27749207916
Out[8]:
Mean SD
ADANIPORTS 0.146732 0.308613 In [10]: 1 weights = 1 / len(s_ticker_list)

2 weights = [weights] * len(s_ticker_list)
ASIANPAINT 0.254572 0.214106
AXISBANK 0.216748 0.279921 In [11]: 1 sp_ticker_ret_hist_df = pd.DataFrame()

2 sp_ticker_ret_hist_df["Portfolio"] = s_ticker_ret_hist_df.dot(weights)
BAJAJ-AUTO 0.093869 0.221231
3 ret = sp_ticker_ret_hist_df['Portfolio'].mean()*time
BAJAJFINSV 0.438334 0.294133 4 sd = sp_ticker_ret_hist_df['Portfolio'].std()*np.sqrt(time)
5 sr = (ret - rf) / sd
BAJFINANCE 0.593202 0.327144 6 portf_ret = ret * investment
0.186642 0.337235
7 portf_sd = sd * investment
BHARTIARTL
8
BPCL 0.001328 0.412570 9 print("Investment :", investment)
10 print("Portfolio Return:", portf_ret)
BRITANNIA 0.103488 0.362333
11 print("Portfolio SD :", portf_sd)
CIPLA -0.028010 0.243157
Investment : 1000000
COALINDIA -0.086463 0.257124 Portfolio Return: 110739.97790607161
Portfolio SD : 129223.8925618024
Equally Weighted Portfolio vs. Benchmark | Risk-Return Profile | Sharpe Ratio

Comparison between Equally Weighted Portfolio vs. Benchmark
In [12]: 1 print("Investment :", investment) In [15]: 1 weights = np.random.random(len(s_ticker_list))

2 print("Portfolio Return:", b_portf_ret) 2 weights = weights / np.sum(weights)
3 print("Portfolio SD :", b_portf_sd) 3 weights
4 print("")
5 print("Investment :", investment) Out[15]: array([3.43202393e-02, 3.73588420e-02, 3.09804141e-02, 1.09797596e-02,
6 print("Portfolio Return:", portf_ret) 2.22771701e-02, 3.11769227e-02, 1.78243143e-02, 1.41896092e-02,
7 print("Portfolio SD :", portf_sd) 2.71338399e-02, 1.64737074e-03, 4.08975040e-03, 3.25742865e-02,
7.29800734e-03, 4.11945397e-02, 2.43061026e-02, 2.78889413e-02,
Investment : 1000000 3.45622359e-02, 1.60238492e-02, 2.00893618e-02, 9.18965145e-03,
Portfolio Return: 142926.03665209853 1.14254789e-02, 5.20727947e-03, 4.32708394e-03, 3.31171544e-02,
Portfolio SD : 120693.27749207916 8.43938446e-03, 3.11453830e-03, 4.13547152e-02, 3.51798196e-02,
2.77113950e-02, 1.18171337e-02, 2.99802996e-02, 4.06307783e-02,
Investment : 1000000 4.10726210e-04, 2.35103147e-03, 1.31846250e-02, 1.30824116e-02,
Portfolio Return: 110739.97790607161 2.37179901e-03, 2.17028977e-02, 3.14014757e-02, 8.19419247e-03,
Portfolio SD : 129223.8925618024 1.59742558e-02, 1.68434989e-02, 3.71841494e-02, 3.29669418e-02,
1.82567358e-02, 2.12414987e-02, 1.26945701e-02, 1.27666588e-02,
6.19054216e-05, 4.19003572e-02])
In [13]: 1 print("Benchmark SR:", b_sr)
2 print("Portfolio SR:", sr)
In [16]: 1 weights = np.random.random(len(s_ticker_list))
Benchmark SR: 0.6870808248416386 2 weights = weights / np.sum(weights)
Portfolio SR: 0.39265167532238515 3 sp_ticker_ret_hist_df = pd.DataFrame()
4 sp_ticker_ret_hist_df["Portfolio"] = s_ticker_ret_hist_df.dot(weights)
5 ret = sp_ticker_ret_hist_df['Portfolio'].mean()*time
Random Weighted Portfolio vs. Benchmark | Risk-Return Profile | Sharpe Ratio 6 sd = sp_ticker_ret_hist_df['Portfolio'].std()*np.sqrt(time)
7 sr = (ret - rf) / sd
In [14]: 1 b_ret = b_ticker_spot_hist_df['%Change'][1:].mean()*time 8 portf_ret = ret * investment
2 b_sd = b_ticker_spot_hist_df['%Change'][1:].std()*np.sqrt(time) 9 portf_sd = sd * investment
3 b_sr = (b_ret - rf) / b_sd 10
4 b_portf_ret = b_ret * investment 11 print("Investment :", investment)
5 b_portf_sd = b_sd * investment 12 print("Portfolio Return:", portf_ret)
6 13 print("Portfolio SD :", portf_sd)
7 print("Investment :", investment)
8 print("Benchmark Return:", b_portf_ret) Portfolio Return: 116988.15937315492
9 print("Benchmark SD :", b_portf_sd)
Portfolio SD : 127452.39709462825
Benchmark Return: 142926.03665209853
Benchmark SD : 120693.27749207916 Comparison between Random Weighted Portfolio vs. Benchmark
In [17]: 1 print("Investment :", investment) In [39]: 1 sp_ticker_ret_simu_df = pd.DataFrame()

2 print("Portfolio Return:", b_portf_ret) 2 portf_optimum = pd.DataFrame()
3 print("Portfolio SD :", b_portf_sd) 3
4 print("") 4 for i in range(simulations):
5 print("Investment :", investment) 5 weights = np.random.random(len(s_ticker_list))
6 print("Portfolio Return:", portf_ret) 6 weights = weights / np.sum(weights)
7 print("Portfolio SD :", portf_sd) 7
8 portf_ret_simu_df = pd.DataFrame()
Investment : 1000000 9 portf_ret_simu_df = s_ticker_ret_hist_df.dot(weights)
Portfolio Return: 142926.03665209853 10
Portfolio SD : 120693.27749207916 11 ret = portf_ret_simu_df.mean()
12 sd = portf_ret_simu_df.std()
Investment : 1000000 13 sr = (ret - (rf/252)) / sd
Portfolio Return: 116988.15937315492 14
Portfolio SD : 127452.39709462825 15 temp1 = pd.DataFrame({
16 'Portfolio Return': ret,
17 'Portfolio SD': sd,
18 'Portfolio SR': sr,
19 }, index=[0])
2 print("Portfolio SR:", sr)
20 sp_ticker_ret_simu_df = sp_ticker_ret_simu_df.append(temp1)
Benchmark SR: 0.6870808248416386 21
Portfolio SR: 0.4471328956711855 22 portf_optimum = sp_ticker_ret_simu_df.sort_values(by="Portfolio SR", ascending=False)
23 portf_ret_p = portf_optimum.iloc[0,0]
24 portf_sd_p = portf_optimum.iloc[0,1]
25 portf_sr_p = portf_optimum.iloc[0,2]
Simulator: Optimized Portfolio vs. Benchmark | Risk-Return Profile | Sharpe Ratio 26
27 portf_ret = portf_ret_p * time * investment
In [19]: 1 b_ret = b_ticker_spot_hist_df['%Change'][1:].mean()*time 28 portf_sd = portf_sd_p * np.sqrt(time) * investment
2 b_sd = b_ticker_spot_hist_df['%Change'][1:].std()*np.sqrt(time) 29 portf_sr = ((portf_ret_p * time) - rf) / (portf_sd_p * np.sqrt(time))
3 b_sr = (b_ret - rf) / b_sd 30
4 b_portf_ret = b_ret * investment 31 print("Investment :", investment)
5 b_portf_sd = b_sd * investment 32 print("Portfolio Return:", portf_ret)
6 33 print("Portfolio SD :", portf_sd)
7 print("Investment :", investment)
8 print("Benchmark Return:", b_portf_ret) Investment : 1000000
9 print("Benchmark SD :", b_portf_sd) Portfolio Return: 157623.43471432617
Portfolio SD : 126338.35300157545
Benchmark Return: 142926.03665209853
Benchmark SD : 120693.27749207916
Kickoff
In [ ]: 1 portf_optimum['Portfolio Return'] = portf_optimum['Portfolio Return'] * time In [42]: 1 plt.figure(figsize=(20,10))

2 portf_optimum['Portfolio SD'] = portf_optimum['Portfolio SD'] * np.sqrt(time) 2 plt.scatter(sp_ticker_ret_simu_df["Portfolio SD"]*np.sqrt(time), sp_ticker_ret_simu_df["Portfolio Return"]*t
3 portf_optimum 3
4 plt.scatter(portf_optimum.iloc[0,1]*np.sqrt(time), portf_optimum.iloc[0,0]*time, color='b', s=250)
5 plt.annotate("---Portfolio", (portf_optimum.iloc[0,1]*np.sqrt(time), portf_optimum.iloc[0,0]*time), fontsize
Comparison between Simulated Portfolio vs. Benchmark 6
7 plt.scatter(b_sd, b_ret, color='r', s=250)
8 plt.annotate("---Benchmark", (b_sd, b_ret), fontsize=12, color='black')
In [40]: 1 print("Investment :", investment) 9
2 print("Portfolio Return:", b_portf_ret) 10 plt.suptitle('Simulation: Portfolio vs. Benchmark | Risk-Return Profile', fontsize=12)
3 print("Portfolio SD :", b_portf_sd) 11 plt.xlabel("Standard Deviation")
4 print("") 12 plt.ylabel("Mean Return")
5 print("Investment :", investment) 13 plt.show()
6 print("Portfolio Return:", portf_ret)
7 print("Portfolio SD :", portf_sd)
Portfolio Return: 142926.03665209853
Portfolio SD : 120693.27749207916
Portfolio Return: 157623.43471432617
Portfolio SD : 126338.35300157545

2 print("Portfolio SR:", portf_sr)
Benchmark SR: 0.6870808248416386

Portfolio SR: 0.7727141631576343
Project: Portfolio Construction & Optimization
Identify the weights under simulated portfolio approach.
In [43]: 1 rr_profile = pd.DataFrame({

2 "Mean": [portf_ret_p*time, b_ret],
3 "SD": [portf_sd_p*np.sqrt(time), b_sd]
4 }, index=["Simulated Portfolio", "Benchmark Portfolio"])
5 rr_profile
Out[43]:
Mean SD
Simulated Portfolio 0.157623 0.126338
Benchmark Portfolio 0.142926 0.120693
In [44]: 1 df = rr_profile.append(s_ticker_rr_profile_df)
2 df['SR'] = (df['Mean'] - rf) / df["SD"]
3 df
Out[44]:
Mean SD SR
Simulated Portfolio 0.157623 0.126338 0.772714
Benchmark Portfolio 0.142926 0.120693 0.687081
ADANIPORTS 0.146732 0.308613 0.281038
ASIANPAINT 0.254572 0.214106 0.908763
AXISBANK 0.216748 0.279921 0.559973
BAJAJ-AUTO 0.093869 0.221231 0.153092
BAJAJFINSV 0.438334 0.294133 1.286268
BAJFINANCE 0.593202 0.327144 1.629869

Risk-Return Profile - Stocks | Portfolio | Benchmark
BHARTIARTL 0.186642 0.337235 0.375531
BPCL 0.001328 0.412570 -0.142211
BRITANNIA 0.103488 0.362333 0.120023
In [45]: 1 plt.figure(figsize=(20,10))
2 plt.scatter(df["SD"], df["Mean"])
3
4 plt.scatter(df.loc["Simulated Portfolio", "SD"], df.loc["Simulated Portfolio", "Mean"], color='b', s=250)
5 plt.annotate("---Portfolio", (df.loc["Simulated Portfolio", "SD"], df.loc["Simulated Portfolio", "Mean"]), f
6
7 plt.scatter(df.loc["Benchmark Portfolio", "SD"], df.loc["Benchmark Portfolio", "Mean"], color='r', s=250)
8 plt.annotate("---Benchmark", (b_sd, b_ret), fontsize=12, color='black')
9
10 plt.suptitle('Risk-Return Profile - Stocks | Portfolio | Benchamrk', fontsize=12)
11 plt.xlabel("Standard Deviation")
12 plt.ylabel("Mean Return")
13 plt.show()
Analytics
In [46]: 1 df_higher_mean = df[df['Mean'] >= df.loc["Simulated Portfolio", "Mean"]].sort_values(by=['Mean'], ascending= In [47]: 1 1 - (df.loc["Simulated Portfolio", "SD"] / df.loc["ICICIBANK", "SD"])
2 df_lower_sd = df[df['SD'] <= df.loc["Simulated Portfolio", "SD"]].sort_values(by=['SD'], ascending=False)
3 print(df_higher_mean) Out[47]: 0.575618753706364
4 print(df_lower_sd)
In [48]: 1 df['DRatio'] = df.loc["Simulated Portfolio", "SD"] / df['SD']
Mean SD SR
2 df
BAJFINANCE 0.593202 0.327144 1.629869
TITAN 0.485473 0.327154 1.300530 Out[48]:
BAJAJFINSV 0.438334 0.294133 1.286268 Mean SD SR DRatio
TATACONSUM 0.379408 0.327609 0.974965
DIVISLAB 0.347802 0.350771 0.820483 Simulated Portfolio 0.157623 0.126338 0.772714 1.000000
NESTLEIND 0.332469 0.216543 1.258269 Benchmark Portfolio 0.142926 0.120693 0.687081 1.046772
HDFCLIFE 0.331218 0.291921 0.929080
KOTAKBANK 0.316419 0.219698 1.167144 ADANIPORTS 0.146732 0.308613 0.281038 0.409375
HINDUNILVR 0.307279 0.194055 1.274275
ASIANPAINT 0.254572 0.214106 0.908763 0.590073
ICICIBANK 0.302969 0.297700 0.816153
HDFC 0.258261 0.223339 0.887712 AXISBANK 0.216748 0.279921 0.559973 0.451336
ASIANPAINT 0.254572 0.214106 0.908763
AXISBANK 0.216748 0.279921 0.559973 BAJAJ-AUTO 0.093869 0.221231 0.153092 0.571070
RELIANCE 0.214392 0.393515 0.392340 BAJAJFINSV 0.438334 0.294133 1.286268 0.429528
TECHM 0.188675 0.270197 0.476226
BHARTIARTL 0.186642 0.337235 0.375531 BAJFINANCE 0.593202 0.327144 1.629869 0.386185
SBILIFE 0.177249 0.274036 0.427860
BHARTIARTL 0.186642 0.337235 0.375531 0.374631
SBIN 0.163963 0.343142 0.302973
HINDALCO 0.158421 0.327037 0.300949 BPCL 0.001328 0.412570 -0.142211 0.306223
BRITANNIA 0.103488 0.362333 0.120023 0.348681
Mean SD SR
Benchmark Portfolio 0.142926 0.120693 0.687081
Variance-Covariance & Correlation
Diversification Ratio
Diversification Ratio = Portfolio SD / Stock SD

(lower the better)
In [57]: 1 s_ticker_cov_hist_df = s_ticker_ret_hist_df.cov()*time In [50]: 1 s_ticker_corr_hist_df = s_ticker_ret_hist_df.corr()

2 s_ticker_cov_hist_df.round(6) 2 s_ticker_corr_hist_df.round(4)
Out[57]: Out[50]:
BAJAJ- BAJAJ-
ADANIPORTS ASIANPAINT AXISBANK BAJAJFINSV BAJFINANCE BHARTIARTL BPCL BRITANNIA CIPLA ... SUN ADANIPORTS ASIANPAINT AXISBANK BAJAJFINSV BAJFINANCE BHARTIARTL BPCL BRITANNIA CIPLA ... SUNPHAR
AUTO AUTO
ADANIPORTS 0.095242 0.016780 0.023662 0.017421 0.029928 0.035363 0.018885 0.030657 0.015196 0.016857 ... ADANIPORTS 1.0000 0.2539 0.2739 0.2552 0.3297 0.3503 0.1815 0.2408 0.1359 0.2246 ... 0.1
ASIANPAINT 0.016780 0.045842 0.017222 0.013581 0.022076 0.020405 0.014065 0.023600 0.010962 0.004859 ... ASIANPAINT 0.2539 1.0000 0.2873 0.2867 0.3506 0.2913 0.1948 0.2672 0.1413 0.0933 ... 0.0
AXISBANK 0.023662 0.017222 0.078356 0.014836 0.027235 0.029090 0.017151 0.023607 0.013149 0.013001 ... AXISBANK 0.2739 0.2873 1.0000 0.2396 0.3308 0.3177 0.1817 0.2044 0.1296 0.1910 ... 0.1
BAJAJ-AUTO 0.017421 0.013581 0.014836 0.048943 0.019691 0.019647 0.012686 0.020663 0.003877 0.010520 ... BAJAJ-AUTO 0.2552 0.2867 0.2396 1.0000 0.3026 0.2715 0.1700 0.2264 0.0484 0.1956 ... 0.1
BAJAJFINSV 0.029928 0.022076 0.027235 0.019691 0.086514 0.067627 0.020797 0.031098 0.017283 0.012088 ... BAJAJFINSV 0.3297 0.3506 0.3308 0.3026 1.0000 0.7028 0.2097 0.2563 0.1622 0.1690 ... 0.1
BAJFINANCE 0.035363 0.020405 0.029090 0.019647 0.067627 0.107023 0.020166 0.034381 0.015309 0.014264 ... BAJFINANCE 0.3503 0.2913 0.3177 0.2715 0.7028 1.0000 0.1828 0.2547 0.1292 0.1793 ... 0.1
BHARTIARTL 0.018885 0.014065 0.017151 0.012686 0.020797 0.020166 0.113727 0.017786 0.005648 0.012786 ... BHARTIARTL 0.1815 0.1948 0.1817 0.1700 0.2097 0.1828 1.0000 0.1278 0.0462 0.1559 ... 0.0
BPCL 0.030657 0.023600 0.023607 0.020663 0.031098 0.034381 0.017786 0.170214 0.004947 0.008205 ... BPCL 0.2408 0.2672 0.2044 0.2264 0.2563 0.2547 0.1278 1.0000 0.0331 0.0818 ... 0.0
BRITANNIA 0.015196 0.010962 0.013149 0.003877 0.017283 0.015309 0.005648 0.004947 0.131285 0.005811 ... BRITANNIA 0.1359 0.1413 0.1296 0.0484 0.1622 0.1292 0.0462 0.0331 1.0000 0.0660 ... 0.0
CIPLA 0.016857 0.004859 0.013001 0.010520 0.012088 0.014264 0.012786 0.008205 0.005811 0.059125 ... CIPLA 0.2246 0.0933 0.1910 0.1956 0.1690 0.1793 0.1559 0.0818 0.0660 1.0000 ... 0.3
Data Cleaning
In [ ]: 1 s_ticker_ret_hist_df.transpose()
In [ ]: 1 s_ticker_ret_hist_df.isnull().sum()
In [ ]: 1 s_ticker_ret_hist_df.fillna(0).transpose()
Engine: Optimized Portfolio vs. Benchmark | Risk-Return Profile | Sharpe Ratio
In [65]: 1 from pypfopt import risk_models, expected_returns

2 from pypfopt.efficient_frontier import EfficientFrontier
3 from pypfopt.discrete_allocation import DiscreteAllocation, get_latest_prices
In [52]: 1 s_ticker_close_hist_df = pd.DataFrame() In [67]: 1 s_ticker_ret_hist_df = expected_returns.mean_historical_return(s_ticker_close_hist_df)

2 for item in s_ticker_list: 2 s_ticker_cov_hist_df = risk_models.sample_cov(s_ticker_close_hist_df)
3 s_ticker_close_hist_df[item] = s_ticker_spot_hist_dc[item]['Close'] 3 s_ticker_cov_hist_df
Out[67]:
In [53]: 1 s_ticker_close_hist_df BAJAJ-
ADANIPORTS ASIANPAINT AXISBANK BAJAJFINSV BAJFINANCE BHARTIARTL BPCL BRITANNIA CIPLA ... SUN
AUTO
Out[53]:
BAJAJ- ADANIPORTS 0.095371 0.016802 0.023694 0.017445 0.029968 0.035411 0.018911 0.030699 0.015216 0.016879 ...
ADANIPORTS ASIANPAINT AXISBANK BAJAJFINSV BAJFINANCE BHARTIARTL BPCL BRITANNIA CIPLA ... SUNPHARMA TATA
AUTO
ASIANPAINT 0.016802 0.045903 0.017245 0.013600 0.022106 0.020431 0.014084 0.023632 0.010977 0.004866 ...
Date
AXISBANK 0.023694 0.017245 0.078462 0.014856 0.027271 0.029129 0.017174 0.023639 0.013167 0.013018 ...
2017-
273.80 904.65 447.75 2598.50 2949.65 870.05 311.00 640.50 2886.45 566.00 ... 634.05 BAJAJ-AUTO 0.017445 0.013600 0.014856 0.049009 0.019718 0.019674 0.012703 0.020691 0.003883 0.010535 ...
01-02
2017- BAJAJFINSV 0.029968 0.022106 0.027271 0.019718 0.086631 0.067718 0.020825 0.031140 0.017306 0.012104 ...
273.95 896.60 455.25 2619.20 3016.65 884.00 304.45 650.55 2872.25 573.65 ... 636.10
01-03
BAJFINANCE 0.035411 0.020431 0.029129 0.019674 0.067718 0.107167 0.020193 0.034428 0.015330 0.014284 ...
2017-
274.90 906.60 453.10 2684.10 2960.85 871.90 313.90 655.45 2852.40 568.25 ... 637.35 BHARTIARTL 0.018911 0.014084 0.017174 0.012703 0.020825 0.020193 0.113881 0.017810 0.005655 0.012804 ...
01-04
BPCL 0.030699 0.023632 0.023639 0.020691 0.031140 0.034428 0.017810 0.170445 0.004954 0.008216 ...
2017-
287.50 916.50 458.05 2723.35 3018.45 899.75 321.10 672.70 2865.80 579.85 ... 643.45
01-05 BRITANNIA 0.015216 0.010977 0.013167 0.003883 0.017306 0.015330 0.005655 0.004954 0.131463 0.005819 ...
2017- CIPLA 0.016879 0.004866 0.013018 0.010535 0.012104 0.014284 0.012804 0.008216 0.005819 0.059205 ...
286.05 929.50 455.20 2707.35 2978.55 878.45 319.75 664.85 2894.95 582.85 ... 640.75
01-06
... ... ... ... ... ... ... ... ... ... ... ... ...
2019- In [68]: 1 efficient_frontier = EfficientFrontier(s_ticker_ret_hist_df, s_ticker_cov_hist_df)

368.60 1803.45 740.65 3226.75 9294.85 4139.50 457.15 477.80 3091.05 478.70 ... 429.80 2 raw_weights = efficient_frontier.max_sharpe()
12-24
3 optimum_weights = efficient_frontier.clean_weights()
2019- 4 print(optimum_weights)
363.65 1809.60 736.50 3230.05 9350.10 4187.10 447.55 477.20 3062.30 474.15 ... 422.15
12-26
OrderedDict([('ADANIPORTS', 0.0), ('ASIANPAINT', 0.0), ('AXISBANK', 0.0), ('BAJAJ-AUTO', 0.0), ('BAJAJFINSV',
2019-
363.70 1812.25 760.15 3241.95 9443.15 4252.65 455.10 490.95 3042.10 481.10 ... 426.00 0.0), ('BAJFINANCE', 0.23729), ('BHARTIARTL', 0.0), ('BPCL', 0.0), ('BRITANNIA', 0.0), ('CIPLA', 0.0), ('COAL
12-27
INDIA', 0.0), ('DIVISLAB', 0.04192), ('DRREDDY', 0.0), ('EICHERMOT', 0.0), ('GRASIM', 0.0), ('HCLTECH', 0.0),
2019- ('HDFC', 0.0), ('HDFCBANK', 0.0), ('HDFCLIFE', 0.06254), ('HEROMOTOCO', 0.0), ('HINDALCO', 0.0), ('HINDUNILV
365.95 1802.30 754.10 3251.95 9439.20 4243.30 460.50 493.05 3047.35 479.95 ... 430.15
12-30 R', 0.1767), ('ICICIBANK', 0.00272), ('INDUSINDBK', 0.0), ('INFY', 0.0), ('IOC', 0.0), ('ITC', 0.0), ('JSWSTE
2019-
EL', 0.0), ('KOTAKBANK', 0.1108), ('LT', 0.0), ('M&M', 0.0), ('MARUTI', 0.0), ('NESTLEIND', 0.18655), ('NTP
366.00 1784.95 754.10 3185.00 9393.35 4234.75 455.80 491.55 3027.80 478.20 ... 432.55 C', 0.0), ('ONGC', 0.0), ('POWERGRID', 0.0), ('RELIANCE', 0.0), ('SBILIFE', 0.0), ('SBIN', 0.0), ('SHREECEM',
12-31
0.0), ('SUNPHARMA', 0.0), ('TATACONSUM', 0.01521), ('TATAMOTORS', 0.0), ('TATASTEEL', 0.0), ('TCS', 0.0), ('T
ECHM', 0.0262), ('TITAN', 0.14007), ('ULTRACEMCO', 0.0), ('UPL', 0.0), ('WIPRO', 0.0)])
739 rows × 50 columns
05/09/2021 Portfolio Construction & Optimization { Python } | Simulator | Analytics | Engine - Jupyter Notebook
In [70]: 1 efficient_frontier.portfolio_performance(verbose=True)
Expected annual return: 45.6%

Annual volatility: 15.9%
Sharpe Ratio: 2.75
Out[70]: (0.4563880020607941, 0.15855281059794166, 2.752319561003476)
localhost:8888/notebooks/Desktop/Projects/Programming/Python/Portfolio Construction %26 Optimization %7B Python %7D %7C Simulator %7C Analytics %7C Engine.ipynb 23/23

Portfolio Construction & Optimization (Python) Simulator Analytics

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Portfolio Construction & Optimization (Python) Simulator Analytics

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05/09/2021 Portfolio Construction & Optimization { Python } | Simulator | Analytics | Engine - Jupyter Notebook 05/09/2021 Portfolio Construction &

In [3]: 1 # ticker list

In [5]: 1 s_ticker_spot_hist_dc['HDFCLIFE'] In [6]: 1 b_ticker_spot_hist_df

2017- 2017-01-04 8202.65 8218.50 8180.90 8190.50 136476345 6.543130e+10 -0.000214

2019- Risk (Standard Deviation) & Return (Mean) - Stocks | Benchmark

2019- In [7]: 1 print("Benchmark Mean Return :", b_ticker_spot_hist_df['%Change'].mean()*time)

521 rows × 15 columns Benchmark Mean Return : 0.14273263200168973

In [8]: 1 s_ticker_ret_hist_df = pd.DataFrame() In [9]: 1 b_ret = b_ticker_spot_hist_df['%Change'][1:].mean()*time

ADANIPORTS 0.146732 0.308613 In [10]: 1 weights = 1 / len(s_ticker_list)

AXISBANK 0.216748 0.279921 In [11]: 1 sp_ticker_ret_hist_df = pd.DataFrame()

Equally Weighted Portfolio vs. Benchmark | Risk-Return Profile | Sharpe Ratio

In [12]: 1 print("Investment :", investment) In [15]: 1 weights = np.random.random(len(s_ticker_list))

In [17]: 1 print("Investment :", investment) In [39]: 1 sp_ticker_ret_simu_df = pd.DataFrame()

In [ ]: 1 portf_optimum['Portfolio Return'] = portf_optimum['Portfolio Return'] * time In [42]: 1 plt.figure(figsize=(20,10))

In [41]: 1 print("Benchmark SR:", b_sr)

Benchmark SR: 0.6870808248416386

Project: Portfolio Construction & Optimization

Identify the weights under simulated portfolio approach.

In [43]: 1 rr_profile = pd.DataFrame({

Simulated Portfolio 0.157623 0.126338

Benchmark Portfolio 0.142926 0.120693

Simulated Portfolio 0.157623 0.126338 0.772714

Benchmark Portfolio 0.142926 0.120693 0.687081

ADANIPORTS 0.146732 0.308613 0.281038

ASIANPAINT 0.254572 0.214106 0.908763

AXISBANK 0.216748 0.279921 0.559973

BAJAJ-AUTO 0.093869 0.221231 0.153092

BAJAJFINSV 0.438334 0.294133 1.286268

BAJFINANCE 0.593202 0.327144 1.629869

BPCL 0.001328 0.412570 -0.142211

BRITANNIA 0.103488 0.362333 0.120023

Diversification Ratio = Portfolio SD / Stock SD

In [57]: 1 s_ticker_cov_hist_df = s_ticker_ret_hist_df.cov()*time In [50]: 1 s_ticker_corr_hist_df = s_ticker_ret_hist_df.corr()

Engine: Optimized Portfolio vs. Benchmark | Risk-Return Profile | Sharpe Ratio

In [65]: 1 from pypfopt import risk_models, expected_returns

In [52]: 1 s_ticker_close_hist_df = pd.DataFrame() In [67]: 1 s_ticker_ret_hist_df = expected_returns.mean_historical_return(s_ticker_close_hist_df)

2019- In [68]: 1 efficient_frontier = EfficientFrontier(s_ticker_ret_hist_df, s_ticker_cov_hist_df)

Expected annual return: 45.6%

Out[70]: (0.4563880020607941, 0.15855281059794166, 2.752319561003476)

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