def test_cla_max_sharpe_short():
cla = CLA(*setup_cla(data_only=True), weight_bounds=(-1, 1))
w = cla.max_sharpe()
assert isinstance(w, dict)
assert set(w.keys()) == set(cla.tickers)
np.testing.assert_almost_equal(cla.weights.sum(), 1)
np.testing.assert_allclose(
cla.portfolio_performance(),
(0.44859872371106785, 0.26762066559448255, 1.601515797589826),
)
sharpe = cla.portfolio_performance()[2]
cla_long_only = setup_cla()
cla_long_only.max_sharpe()
long_only_sharpe = cla_long_only.portfolio_performance()[2]
assert sharpe > long_only_sharpe
def test_cla_max_sharpe_short():
cla = CLA(*setup_cla(data_only=True), weight_bounds=(-1, 1))
w = cla.max_sharpe()
assert isinstance(w, dict)
assert set(w.keys()) == set(cla.tickers)
np.testing.assert_almost_equal(cla.weights.sum(), 1)
np.testing.assert_allclose(
cla.portfolio_performance(),
(0.3799273115521356, 0.23115368271125736, 1.5570909679242886),
)
sharpe = cla.portfolio_performance()[2]
cla_long_only = setup_cla()
cla_long_only.max_sharpe()
long_only_sharpe = cla_long_only.portfolio_performance()[2]
assert sharpe > long_only_sharpe
def _get_efficient_weights(self):
cla = CLA(self.mu, self.S)
cla.max_sharpe()
(mu, sigma, weights) = cla.efficient_frontier()
return mu, sigma, weights
'GOOG': 0.049560084289929286,
'JPM': 0.017675709092515708,
'MA': 0.03812737349732021,
'PFE': 0.07786528342813454,
'RRC': 0.03161528695094597,
'SBUX': 0.039844436656239136,
'SHLD': 0.027113184241298865,
'T': 0.11138956508836476,
'UAA': 0.02711590957075009,
'WMT': 0.10569551148587905,
'XOM': 0.11175337115721229}
"""
# Crticial Line Algorithm
cla = CLA(mu, S)
print(cla.max_sharpe())
cla.portfolio_performance(verbose=True)
"""
{'GOOG': 0.020889868669945022,
'AAPL': 0.08867994115132602,
'FB': 0.19417572932251745,
'BABA': 0.10492386821217001,
'AMZN': 0.0644908140418782,
'GE': 0.0,
'AMD': 0.0,
'WMT': 0.0034898157701416382,
'BAC': 0.0,
'GM': 0.0,
'T': 2.4138966206946562e-19,
'UAA': 0.0,
'SHLD': 0.0,
def optimal_portfolio(mu, S, objective='max_sharpe', get_entire_frontier=True, **kwargs):
"""Solve for optimal portfolio. Wrapper for pypfopt functions
Arguments:
mu (pd.Series) - Expected annual returns
S (pd.DataFrame/np.ndarray) - Expected annual volatility
objective (string, optional) - Optimise for either 'max_sharpe', or 'min_volatility', defaults to 'max_sharpe'
get_entire_frontier (boolean, optional) - Also get the entire efficient frontier, defaults to True
"""
# if need to efficiently compute the entire efficient frontier for plotting, use CLA
# else use standard EfficientFrontier optimiser.
# (Note that optimum weights might be slightly different depending on whether CLA or EfficientFrontier was used)
Optimiser = CLA if get_entire_frontier else EfficientFrontier
op = Optimiser(mu, S)
# risk_aversion = kwargs.get("risk_aversion", 1) # only for max quadratic utility
if (objective is None):
# Get weights for both max_sharpe and min_volatility
opt_weights = []
op.max_sharpe()
opt_weights.append(op.clean_weights())
op.min_volatility()
opt_weights.append(op.clean_weights())
# ef = EfficientFrontier(mu, S)
# ef.max_quadratic_utility(risk_aversion)
# opt_weights.append(ef.clean_weights())
else:
if (objective == 'max_sharpe'):
op.max_sharpe()
elif ('min_vol' in objective):
op.min_volatility()
elif (objective == 'efficient_risk'):
target_volatility = kwargs.get("target_volatility", None)
if target_volatility is None:
print("Error: You have to specify the target_volatility!")
return None, None, None, None
else:
try:
op.efficient_risk(target_volatility)
except ValueError:
# could not solve based on target_volatility, we try lookup table instead
cla = CLA(mu, S)
cla.max_sharpe()
ef_returns, ef_risks, ef_weights = cla.efficient_frontier(points=300)
lookup_v_w = dict(zip(ef_risks, ef_weights))
lookup_v_w = OrderedDict(sorted(lookup_v_w.items()))
w = lookup_v_w[min(lookup_v_w.keys(), key=lambda key: abs(key-target_volatility))]
w = [i[0] for i in w] # flatten
return w, None, None
elif (objective == 'efficient_return'):
target_return = kwargs.get("target_return", None)
if target_return is None:
print("Error: You have to specify the target_return!")
return None, None, None, None
else:
op.efficient_return(target_return)
# elif (objective == 'max_quadratic_utility'):
# op.max_quadratic_utility(risk_aversion)
# # print("Using MAX_QUADRATIC UTILITY")
opt_weights = op.clean_weights()
if get_entire_frontier:
opt_returns, opt_risks, _ = op.efficient_frontier(points=200)
return opt_weights, opt_returns, opt_risks
else:
return opt_weights, None, None
