def test_all_inputs_none(self):
"""
Test allocation when all inputs are None.
"""
with self.assertRaises(ValueError):
herc = HierarchicalEqualRiskContribution()
herc.allocate(asset_names=self.data.columns)
def test_value_error_for_non_date_index(self):
"""
Test ValueError on passing dataframe not indexed by date.
"""
with self.assertRaises(ValueError):
herc = HierarchicalEqualRiskContribution()
data = self.data.reset_index()
herc.allocate(asset_prices=data, asset_names=self.data.columns)
def test_value_error_for_non_dataframe_input(self):
"""
Test ValueError on passing non-dataframe input.
"""
with self.assertRaises(ValueError):
herc = HierarchicalEqualRiskContribution()
herc.allocate(asset_prices=self.data.values,
asset_names=self.data.columns)
def test_value_error_with_no_asset_names(self):
"""
Test ValueError when not supplying a list of asset names and no other input
"""
with self.assertRaises(ValueError):
herc = HierarchicalEqualRiskContribution()
returns = ReturnsEstimators().calculate_returns(
asset_prices=self.data)
herc.allocate(asset_returns=returns.values, optimal_num_clusters=6)
def test_value_error_for_risk_measure(self):
"""
Test HERC when a different allocation metric string is used.
"""
with self.assertRaises(ValueError):
herc = HierarchicalEqualRiskContribution()
herc.allocate(asset_names=self.data.columns,
asset_prices=self.data,
risk_measure='random_metric')
def test_value_error_for_expected_shortfall(self):
"""
Test ValueError when expected_shortfall is the allocation metric, no asset_returns dataframe
is given and no asset_prices dataframe is passed.
"""
with self.assertRaises(ValueError):
herc = HierarchicalEqualRiskContribution()
herc.allocate(asset_names=self.data.columns,
optimal_num_clusters=5,
risk_measure='expected_shortfall')
def test_no_asset_names(self):
"""
Test HERC when not supplying a list of asset names.
"""
herc = HierarchicalEqualRiskContribution()
herc.allocate(asset_prices=self.data, optimal_num_clusters=6)
weights = herc.weights.values[0]
assert (weights >= 0).all()
assert len(weights) == self.data.shape[1]
np.testing.assert_almost_equal(np.sum(weights), 1)
def test_no_asset_names_with_asset_returns(self):
"""
Test HERC when not supplying a list of asset names and when the user passes asset_returns.
"""
herc = HierarchicalEqualRiskContribution()
returns = ReturnsEstimators().calculate_returns(asset_prices=self.data)
herc.allocate(asset_returns=returns, optimal_num_clusters=6)
weights = herc.weights.values[0]
assert (weights >= 0).all()
assert len(weights) == self.data.shape[1]
np.testing.assert_almost_equal(np.sum(weights), 1)
def test_herc_with_input_as_returns(self):
"""
Test HERC when passing asset returns dataframe as input.
"""
herc = HierarchicalEqualRiskContribution()
returns = ReturnsEstimators().calculate_returns(asset_prices=self.data)
herc.allocate(asset_returns=returns, asset_names=self.data.columns)
weights = herc.weights.values[0]
assert (weights >= 0).all()
assert len(weights) == self.data.shape[1]
np.testing.assert_almost_equal(np.sum(weights), 1)
def test_dendrogram_plot(self):
"""
Test if dendrogram plot object is correctly rendered.
"""
herc = HierarchicalEqualRiskContribution()
herc.allocate(asset_prices=self.data, optimal_num_clusters=5)
dendrogram = herc.plot_clusters(assets=self.data.columns)
assert dendrogram.get('icoord')
assert dendrogram.get('dcoord')
assert dendrogram.get('ivl')
assert dendrogram.get('leaves')
assert dendrogram.get('color_list')
def test_quasi_diagnalization(self):
"""
Test the quasi-diagnalisation step of HERC algorithm.
"""
herc = HierarchicalEqualRiskContribution()
herc.allocate(asset_prices=self.data,
linkage='single',
optimal_num_clusters=5,
asset_names=self.data.columns)
assert herc.ordered_indices == [
13, 9, 10, 8, 14, 7, 1, 6, 4, 16, 3, 17, 12, 18, 22, 0, 15, 21, 11,
2, 20, 5, 19
]
def test_herc_expected_shortfall(self):
"""
Test the weights calculated by the HERC algorithm - if all the weights are positive and
their sum is equal to 1.
"""
herc = HierarchicalEqualRiskContribution()
herc.allocate(asset_prices=self.data,
asset_names=self.data.columns,
optimal_num_clusters=5,
risk_measure='expected_shortfall')
weights = herc.weights.values[0]
assert (weights >= 0).all()
assert len(weights) == self.data.shape[1]
np.testing.assert_almost_equal(np.sum(weights), 1)
def test_herc_with_input_as_covariance_matrix(self):
"""
Test HERC when passing a covariance matrix as input.
"""
herc = HierarchicalEqualRiskContribution()
returns = ReturnsEstimators().calculate_returns(asset_prices=self.data)
herc.allocate(asset_names=self.data.columns,
covariance_matrix=returns.cov(),
optimal_num_clusters=6,
asset_returns=returns)
weights = herc.weights.values[0]
assert (weights >= 0).all()
assert len(weights) == self.data.shape[1]
np.testing.assert_almost_equal(np.sum(weights), 1)
def test_herc_with_asset_returns_as_none(self):
"""
Test HERC when asset returns are not required for calculating the weights.
"""
herc = HierarchicalEqualRiskContribution()
returns = ReturnsEstimators().calculate_returns(asset_prices=self.data)
herc.allocate(asset_names=self.data.columns,
covariance_matrix=returns.cov(),
optimal_num_clusters=5,
risk_measure='equal_weighting')
weights = herc.weights.values[0]
assert (weights >= 0).all()
assert len(weights) == self.data.shape[1]
np.testing.assert_almost_equal(np.sum(weights), 1)
def _generateAllocations(self):
# Create object:
self.STRATEGY = HierarchicalEqualRiskContribution()
# Allocate:
self.STRATEGY.allocate(
asset_names=self.DF_CLOSE.columns,
asset_prices=self.DF_CLOSE,
#risk_measure='expected_shortfall',
risk_measure='conditional_drawdown_risk',
linkage='ward')
# Plot portfolio metrics:
self._plotOptimalPortfolio()
self._plotClusters()
class HierarchicalEqualRiskContributionStrategy(object):
def __init__(self):
# Get the data:
self.loadDirectory = os.path.expandvars(
'${HOME}/Desktop/quant-research-env/DARWINStrategyContentSeries/Data/ClosePricePortfolio.csv'
)
self.saveDirectory = os.path.expandvars(
'${HOME}/Desktop/quant-research-env/DARWINStrategyContentSeries/OnlinePortfolioStrategies/_OPTIMIZATIONS/HERC/'
)
self.DF_CLOSE = self._loadTechnicalDataset()
def _loadTechnicalDataset(self):
# Load it:
ASSET_UNIVERSE = pd.read_csv(self.loadDirectory,
index_col=0,
parse_dates=True,
infer_datetime_format=True)
print('¡Asset Universe file LOADED!')
return ASSET_UNIVERSE
def _generateAllocations(self):
# Create object:
self.STRATEGY = HierarchicalEqualRiskContribution()
# Allocate:
self.STRATEGY.allocate(
asset_names=self.DF_CLOSE.columns,
asset_prices=self.DF_CLOSE,
#risk_measure='expected_shortfall',
risk_measure='conditional_drawdown_risk',
linkage='ward')
# Plot portfolio metrics:
self._plotOptimalPortfolio()
self._plotClusters()
def _plotOptimalPortfolio(self):
print(
f'Optimal number of clusters: {self.STRATEGY.optimal_num_clusters}'
)
# Get weights:
weights = self.STRATEGY.weights
y_pos = np.arange(len(weights.columns))
# Create the figure:
f1, ax = plt.subplots(figsize=(10, 5))
# Create the plots:
ax.bar(list(weights.columns), weights.values[0], label='Assets')
plt.xticks(y_pos, rotation=45, size=10)
plt.xticks(y_pos, rotation=45, size=10)
ax.grid(True)
plt.grid(linestyle='dotted')
plt.xlabel('Assets',
horizontalalignment='center',
verticalalignment='center',
fontsize=14,
labelpad=20)
plt.ylabel('Asset Weights',
horizontalalignment='center',
verticalalignment='center',
fontsize=14,
labelpad=20)
ax.legend(loc='best')
plt.title(
f'Optimal portfolio for {self.STRATEGY.__class__.__name__} optimization'
)
plt.subplots_adjust(left=0.09,
bottom=0.20,
right=0.94,
top=0.90,
wspace=0.2,
hspace=0)
f1.canvas.set_window_title('OPTIMIZATION METHODS')
# In PNG:
plt.savefig(self.saveDirectory + 'OptimalPortfolio.png')
# Show:
plt.show()
def _plotClusters(self):
# Create the figure:
f1, ax = plt.subplots(figsize=(10, 5))
# Create the plots:
self.STRATEGY.plot_clusters(self.DF_CLOSE.columns)
ax.grid(True)
plt.grid(linestyle='dotted')
plt.title(
f'Dendrogram for {self.STRATEGY.__class__.__name__} optimization')
plt.xticks(rotation=45)
plt.subplots_adjust(left=0.09,
bottom=0.20,
right=0.94,
top=0.90,
wspace=0.2,
hspace=0)
f1.canvas.set_window_title('OPTIMIZATION METHODS')
# In PNG:
plt.savefig(self.saveDirectory + 'Dendogram.png')
# Show:
plt.show()
def _predictOutcome(self):
pass