Stocks Portfolio Analysis

Detailed stock analysis process.

library(quantmod)
library(ggplot2) 
library(xts)
library(highcharter)
library(PerformanceAnalytics)
library(dygraphs)

## Dates have been loaded as a factor instead of as dates. 
#There is need to convert this variable to the date class and covert the rest of the variables to xts(Extensible Time Series)

temp <- xts(x =fundreturn[,-1], order.by = as.Date(fundreturn[,1])) 
# all the variables except data are coerced to xts using date as the index.
# Overwriting the fundreturn object with the xts temp object
fundreturn <- temp
str(fundreturn)

An 'xts' object on 2007-06-01/2016-11-01 containing:
  Data: num [1:114, 1:18] 0.024 0.0057 0.0165 0.0126 -0.0301 0.0026 0.0045 0.0218 0.027 0.0315 ...
 - attr(*, "dimnames")=List of 2
  ..$ : NULL
  ..$ : chr [1:18] "SPY" "IJS" "VTI" "IYR" ...
  Indexed by objects of class: [Date] TZ: UTC
  xts Attributes:  
 NULL

rm(temp) # getting rid of temp object
## Next I, stack variables of the same unique class within the same column.
#That is the returns of all the stocks in one column and the tickers in another column, indexed by the date variable.

# make use of a temporary object.
temp <- data.frame(index(fundreturn), 
                   stack(as.data.frame(coredata(fundreturn))))
fundreturn_final <- temp

# Give the variables more descriptive names 
    names(fundreturn_final)[1] <-  "Year"
    names(fundreturn_final)[2] <-  "PercentageReturn"
    names(fundreturn_final)[3] <-  "Stockticker"
    names(fundreturn_final)

[1] "Year"             "PercentageReturn" "Stockticker"     

  rm(temp) # removing the temp. object
  # we coerce the data frame back to xts to be able to use quantmod and highcharter
#fundreturn_final <- xts(x=fundreturn_final[-1], order.by = as.Date(fundreturn_final[,1]))

ggplot(data = fundreturn_final, aes(x=Year, 
                                    y=PercentageReturn, color=Stockticker)) +
  geom_line()

# Google stock Performance
# GOOG
GOOG <- subset(fundreturn_final, Stockticker=="GOOG")

g <- ggplot(data = GOOG, aes(x=Year, y=PercentageReturn)) +
  geom_line()
# add features
g <- g + ggtitle("Google Monthly Return", 
                 subtitle = "For the Period between June 2007 - Nov. 2016") + 
  
      theme(panel.background = element_rect(fill = "white",
                                            colour = "grey50"),
            axis.text = element_text(colour = "blue"),
            
            axis.title.y = element_text(size = rel(1.0), angle = 90),
            axis.title.x = element_text(size = rel(1.0), angle = 360))

g <- g + labs(x = "Year",
        y ="Return") 

g + annotate("text",x=as.Date("2009-09-01"),
             y=0.3245,label="HR",
             fontface="bold",size=3, 
             colour = "forestgreen") +
annotate("text",x=as.Date("2010-04-01"),
         y=-0.1900,label="LR",
         fontface="bold",size=3,
         colour ="red") 

# Portfolio Performance Appraisal

# Having the following portfolio

# Google = GOOG, Amazon = AZMN,Apple = AAPL JP Morgans = JPM, Microsoft = MSFT, General Electric = GE, and Hewlett Packard = HPQ
#, "GE", "HPQ"

p1 <- subset(fundreturn_final, Stockticker =="AMZN")
p2 <- subset(fundreturn_final, Stockticker =="MSFT")
p3 <- subset(fundreturn_final, Stockticker =="AAPL")
p4 <- subset(fundreturn_final, Stockticker =="GOOG")

portfolio <- rbind(p1,p2,p3,p4) # binding the returns into one returns variable
rm("p1","p2", "p3","p4") # Removal of the temp. subsets 
 
# quick visual representation of the data
p <- ggplot(data = portfolio, aes(x = Year, y =PercentageReturn, colour = Stockticker))+geom_line()
p + labs(
        x = " Year",
        y = "Return",
        colour = "Stock ticker") +
    ggtitle(" Apple, Amazon and Google Stock Returns",subtitle =" For the period June 2007 - Nov. 2016")

#Dygraphing

p1 <- subset(fundreturn_final, Stockticker =="AMZN")
p2 <- subset(fundreturn_final, Stockticker =="MSFT")
p3 <- subset(fundreturn_final, Stockticker =="AAPL")
p4 <- subset(fundreturn_final, Stockticker =="GOOG")


# Converting to xts before graphing
AMZN <- xts(x = p1[,c(-1,-3)], order.by = p1[,1])
MSFT <- xts(x = p2[,c(-1,-3)], order.by = p2[,1])
AAPL <- xts(x = p3[,c(-1,-3)], order.by = p3[,1])
GOOG_ <- xts(x = p4[,c(-1,-3)], order.by = p4[,1])

rm("p1","p2", "p3","p4") # Removal of the temp. subsets 

merged_returns <- merge.xts(AMZN,MSFT,AAPL,GOOG_) # merging the separate share returns into one xts object.

dygraph(merged_returns, main = "Amazon v Microsoft v Apple v Google") %>% # Using pipes to connect the codes
  dyAxis("y", label ="Return") %>%
  dyAxis("x", label ="Year") %>%
  dyOptions(colors = RColorBrewer::brewer.pal(4, "Set2")) 

# Let's now evaluate the portfolio

## Part of the code is adapted from Jonathan Regenstein from RStudio

# We assume an equally weighted portfolio. Allocating 25% to all the stocks in our portfolio
w <- c(.25,.25,.25,.25)

# We use the performanceAnalytics built infuction Return.porftolio to calculate portfolio monthly returns

monthly_P_return <-  Return.portfolio(R = merged_returns, weights = w)

# Use dygraphs to chart the portfolio monthly returns.
dygraph(monthly_P_return, main = "Portfolio Monthly Return") %>% 
  dyAxis("y", label = "Return")

# Add the wealth.index = TRUE argument and, instead of returning monthly returns,
# the function will return the growth of $1 invested in the portfolio.
dollar_growth <- Return.portfolio(merged_returns, weights = w, wealth.index = TRUE)

# Use dygraphs to chart the growth of $1 in the portfolio.
dygraph(dollar_growth, main = "Growth of $1 Invested in Portfolio") %>% 
  dyAxis("y", label = "$")

# Calculating the Sharpe Ratio
# Taking the US 10 Year Treasury Rate of 2.40% as the risk free rate.
# Making use of the built in SharpeRatio function in Performance Analytics package.
print(sharpe_ratio <- round(SharpeRatio(monthly_P_return, Rf = 0.024), 4))

                                portfolio.returns
StdDev Sharpe (Rf=2.4%, p=95%):           -0.0634
VaR Sharpe (Rf=2.4%, p=95%):              -0.0424
ES Sharpe (Rf=2.4%, p=95%):               -0.0298