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bonds and buffett sharpe
require(quantmod)
require(PerformanceAnalytics)
require(xtsExtra)
require(RColorBrewer)
#unfortunately don't feel like fighting IP lawyers so I cannot share this index data
portfolio <- read.csv("file.csv",stringsAsFactors=FALSE)
portfolio <- portfolio[2:NROW(portfolio),2:NCOL(portfolio)]
portfolio <- portfolio[,c(1,3,5)]
#since export has duplicate colnames we need to remove the .1 added
#colnames(portfolio) <- substr(colnames(portfolio),1,nchar(colnames(portfolio))-2)
len <- nchar(portfolio[,1])
xtsdate <- paste(substr(portfolio[,1],len-3,len),"-",
ifelse(len==9,"0",""),substr(portfolio[,1],1,len-8),"-01",sep="")
portfolio.xts <- xts(data.matrix(portfolio[,2:NCOL(portfolio)]),order.by=as.Date(xtsdate))
portfolio.xts <- portfolio.xts/100
portfolio.xts[1,]<-0
charts.RollingPerformance(portfolio.xts[,1], #Barclays Aggregate
width = 60, #rolling 5 year (60 months)
Rf = portfolio.xts[,2], #Barclays 3-month
main = "Barclays Aggregate Performance (Rolling 5 Year)")
getSymbols("SP500", src = "FRED")
getSymbols("GS10", src = "FRED")
require(RQuantLib)
GS10pricereturn<-GS10
GS10pricereturn[1,1]<-0
colnames(GS10pricereturn)<-"US10yPrice"
for (i in 1:(NROW(GS10)-1)) {
GS10pricereturn[i+1,1]<-FixedRateBondPriceByYield(yield=GS10[i+1,1]/100,issueDate=Sys.Date(),
maturityDate= advance("UnitedStates/GovernmentBond", Sys.Date(), 10, 3),
rates=GS10[i,1]/100,period=2)[1]/100-1
}
#total return will be the price return + yield/12 for one month
GS10totalreturn<-GS10pricereturn+lag(GS10,k=1)/12/100
colnames(GS10totalreturn)<-"US10yTotalReturn"
#thanks to PerformanceAnalytics package for this handy rolling correlation calculation
rollcorr <- rollapplyr(na.omit(merge(ROC(SP500,n=1,type="discrete"),
GS10totalreturn)),
width = 60, #5 year rolling
FUN = function(x) cor(x[, 1, drop = FALSE],
x[, 2, drop = FALSE]),
by = 1,
by.column = FALSE,
na.pad = TRUE)
rollcorr[is.na(rollcorr)] <- 0 #change leading NAs to 0
custom.panel <- function (index, x, col, lwd, ...) {
default.panel(index, ifelse(x > 0, x, 0), col = brewer.pal("Greens", n = 9)[7], lwd = 2, ...)
default.panel(index, ifelse(x < 0, x, 0), col = brewer.pal("Reds",n = 9)[7], lwd = 2, ...)
abline(h=pretty(c(par("yaxp")[1],par("yaxp")[2]),n=par("yaxp")[3]),col="gray60",lwd=0.5)
abline (h = 0, col = "black", lwd = 2)
}
plot.xts(rollcorr,
auto.grid = FALSE, #turn off grid for more precise control
bty = "n", #turn off box because I like better
las = 1,
ylim = c(-1,1),
main = NA,
panel = custom.panel, #use our customized panel
type = "l",
major.format = "%Y",
minor.tick = FALSE,
yaxs = "i",
cex.axis = 0.8,
lwd = 2,
blocks = list(start.time = "2000-03-01", end.time = "2012-12-31"))
title(main = "Correlation of US 10y Bonds with S&P 500 (Rolling 5 Year)", outer = TRUE, line = -2, adj = 0.05)
mtext("Source: Federal Reserve Bank of St. Louis (FRED)", side = 1, cex = 0.7, font = 3, adj = 0.9, outer = TRUE, line = -2)
horizon.panel <- function(index,x,...) {
#get some decent colors from RColorBrewer
#we will use colors on the edges so 2:4 for red and 7:9 for blue
require(RColorBrewer)
col.brew <- brewer.pal(name="RdBu",n=10)
#ease this reference later
n=NROW(x)
#clean up NA with either of the two methods below
#x[which(is.na(x),arr.ind=TRUE)[,1],
# unique(which(is.na(x),ar.ind=TRUE)[,2])] <- 0
x <- apply(x,MARGIN=2,FUN=na.fill,fill=0)
#get number of bands for the loop
#limit to 3
nbands = 3
#first tried this but will not work since each series needs to have same number of bands
#min(4,ceiling(max(abs(coredata(x)))/horizonscale))
par(usr=c(index[1],index[n],origin,horizonscale))
for (i in 1:nbands) {
#draw positive
polygon(
c(index[1], index, index[n]),
c(origin, coredata(x) - (i-1) * horizonscale,origin),
col=col.brew[length(col.brew)-nbands+i-1],
border=NA
)
#draw negative
polygon(
c(index[1], index, index[n]),
c(origin, -coredata(x) - (i-1) * horizonscale,origin),
col=col.brew[nbands-i+1],
border=NA
)
}
#delete trash drawn below origin that we keep so no overlap between positive and negative
polygon(
c(index[1], index, index[n]),
c(origin, -ifelse(coredata(x)==origin,horizonscale*5,abs(coredata(x))),origin),
col=par("bg"),
border=NA
)
#draw a line at the origin
abline(h=origin,col="black")
}
horizonscale = 0.25
origin = 0
plot.xts(rollcorr,
auto.grid = FALSE, #turn off grid for more precise control
bty = "n", #turn off box because I like better
las = 1,
ylim = c(origin,horizonscale),
main = NA,
panel = horizon.panel, #use our customized panel
type = "l",
major.format = "%Y",
minor.tick = FALSE,
yax.loc = "none",
yaxt = "n", xaxt = "n",
cex.axis = 0.6,
lwd = 2)
title(main = "Correlation of US 10y Bonds with S&P 500 (Rolling 5 Year)", outer = TRUE, line = -2, adj = 0.05, cex = 0.7)
mtext("Source: Federal Reserve Bank of St. Louis (FRED)", side = 1, cex = 0.7, font = 3, adj = 0.9, outer = TRUE, line = -2)
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