Hi, I built an strategy based on someone else post, which applies Kalman Filter to calculate the hedge ratio, but there is one problem of my algorithm. Also, I include more than one pair in my portfolio.
I manage to keep the leverage of my portfolio under 1, so I use the function computeHoldingsPct(yShares, xShares, yPrice, xPrice) and for each pair I keep the percentage as y_target_pct / float(context.num_pairs), but why my leverage still go over 1 all the time?
Thanks
Ryan,
I'm not 100% on how that is happening, but I think it is some interaction of
order_target and order_target_percent. If you reorder your logic so that you only every make one call to order_target_percent per security, per day, then that would potentially solve the problem.
If you replace lines 88-89 and 99-100 with...
qty_y=int((y_target_pct / float(context.num_pairs))*context.portfolio.portfolio_value/data[stock_y].price)
qty_x=int((x_target_pct / float(context.num_pairs))*context.portfolio.portfolio_value/data[stock_x].price)
order(stock_y, qty_y)
order(stock_x, qty_x)
...does it work like you would expect?
You may want to examine the following.
Clone the backtest and look at the position values and transactions details for the last day.
See log file:
2011-05-31 PRINT executing
2011-05-31 PRINT Currently have: (0, 0) of (Equity(28320 [USO]), Equity(26807 [GLD]))
2011-05-31 handle_data:107 INFO opening short
2011-05-31 PRINT X: Ordered 0.0 of Equity(28320 [USO]) (TARGET qty=0.0)
2011-05-31 PRINT Y: Ordered -0.5 of Equity(26807 [GLD]) (TARGET qty=-66.8717400027)
2011-05-31 PRINT Currently have: (0, 0) of (Equity(14517 [EWC]), Equity(14516 [EWA]))
2011-05-31 handle_data:107 INFO opening short
2011-05-31 PRINT X: Ordered 0.0 of Equity(14517 [EWC]) (TARGET qty=0.0)
2011-05-31 PRINT Y: Ordered -0.5 of Equity(14516 [EWA]) (TARGET qty=-376.081233546)
2011-06-01 PRINT executing
2011-06-01 PRINT Currently have: (0, -66) of (Equity(28320 [USO]), Equity(26807 [GLD]))
2011-06-01 PRINT Currently have: (0, -376) of (Equity(14517 [EWC]), Equity(14516 [EWA]))
2011-06-02 PRINT executing
2011-06-02 PRINT Currently have: (0, -66) of (Equity(28320 [USO]), Equity(26807 [GLD]))
2011-06-02 handle_data:82 INFO closing short: Equity(28320 [USO]),Equity(26807 [GLD])
2011-06-02 handle_data:90 INFO opening long
2011-06-02 PRINT X: Ordered -0.249924421497 of Equity(28320 [USO]) (TARGET qty=-127.141834195)
2011-06-02 PRINT Y: Ordered 0.250075578503 of Equity(26807 [GLD]) (TARGET qty=33.803291719)
2011-06-02 PRINT Currently have: (0, -376) of (Equity(14517 [EWC]), Equity(14516 [EWA]))
2011-06-02 handle_data:82 INFO closing short: Equity(14517 [EWC]),Equity(14516 [EWA])
2011-06-03 PRINT executing
2011-06-03 PRINT Currently have: (-127, 99) of (Equity(28320 [USO]), Equity(26807 [GLD]))
2011-06-03 handle_data:76 INFO closing long: Equity(28320 [USO]),Equity(26807 [GLD])
2011-06-03 handle_data:107 INFO opening short
2011-06-03 PRINT X: Ordered 0.249915937777 of Equity(28320 [USO]) (TARGET qty=127.676488314)
2011-06-03 PRINT Y: Ordered -0.250084062223 of Equity(26807 [GLD]) (TARGET qty=-33.7519884182)
2011-06-03 PRINT Currently have: (0, 0) of (Equity(14517 [EWC]), Equity(14516 [EWA]))
Sorry for so many posts - I just remembered
order_target_percent doesn't account for already submitted orders, so that's why.
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