I notice that my Common Returns look pretty good, and I am trying to turn them into a trading strategy. Is there any way to calculate the portfolio (I do that in the my_rebalance(context,data) section), then get the industry sector exposures before the portfolio is implemented? I would then translate those sector exposures into ETFs and trade them. Thanks!
Hey Ted,
Great question, this is a really good thing to be thinking about when designing a risk-aware strategy. The way you can do it inside the algorithm involves getting a risk_loadings dataframe. This is a 2D object which contains an estimated risk exposure to each risk factor for each tradeable asset. Then you can do a weighted average (matrix product) between your hypothetical portfolio weights and the risk loadings to get hypothetical portfolio exposures. I'm leaving the code here, but check the attached algorithm for a working example.
Keep in mind that as with any quantity, future risk exposures are estimates at best and may not always predict actual behavior.
# Retrieve pipeline output
pipeline_data = context.pipeline_data
risk_loadings = context.risk_loadings
# Normalize your portfolio weights
hypothetical_portfolio_weights = \
pipeline_data.combined_factor / np.sum(pipeline_data.combined_factor)
# Get the estimated risk loadings for only stocks in our portfolio
portfolio_risk_loadings = \
risk_loadings.loc[hypothetical_portfolio_weights.index]
# Compute the estimated risk exposures by doing a weighted average across
# risk loadings
hypothetical_risk_exposures = \
hypothetical_portfolio_weights.dot(portfolio_risk_loadings)
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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.
In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.