demo/chart_concentration.R

In PortfolioAnalytics: Portfolio Analysis, Including Numerical Methods for Optimization of Portfolios

#' ---
#' title: "chart.Concentration Demo"
#' author: "Ross Bennett"
#' date: "7/17/2014"
#' ---

#' This script demonstrates how to use chart.Concentration to visualize
#' the concentration of the portfolio.


library(PortfolioAnalytics)

data(edhec)
R <- edhec[, 1:8]
funds <- colnames(R)

#' Construct initial portfolio
init.portf <- portfolio.spec(assets=funds)
init.portf <- add.constraint(portfolio=init.portf, 
                             type="leverage", 
                             min_sum=0.99, 
                             max_sum=1.01)

init.portf <- add.constraint(portfolio=init.portf, 
                             type="box", 
                             min=0, 
                             max=1)

init.portf <- add.objective(portfolio=init.portf, 
                            type="return", 
                            name="mean", 
                            multiplier=0)

init.portf <- add.objective(portfolio=init.portf, 
                            type="risk", 
                            name="ES")

#' Construct a risk budget portfolio.
rb.portf <- add.objective(portfolio=init.portf, 
                          type="risk_budget", 
                          name="ES",
                          max_prisk=0.4, 
                          arguments=list(p=0.92))

#' Use random portfolios for optimization.
opt <- optimize.portfolio(R=R, 
                          portfolio=init.portf, 
                          optimize_method="random", 
                          search_size=2000, 
                          trace=TRUE)

opt_rb <- optimize.portfolio(R=R, 
                             portfolio=rb.portf, 
                             optimize_method="random", 
                             search_size=2000, 
                             trace=TRUE)

#' This won't work because opt is not a risk budget optimization.
#' This should result in an error and not plot anything.
#chart.Concentration(opt, conc.type="pct_contrib")

#' `opt` is minimum ES optimization so we can still chart it using weights as
#' the measure of concentration.
chart.Concentration(opt, conc.type="weights", chart.assets=TRUE, col=heat.colors(10))
chart.Concentration(opt, conc.type="weights", chart.assets=TRUE, col=bluemono)

#' Here we plot the concentration based on the HHI of the percentage component 
#' contribution to risk.
chart.Concentration(opt_rb, conc.type="pct_contrib")

#' Here we plot the concentration is based on the HHI of the weights.
chart.Concentration(opt_rb, conc.type="weights")