Div_non-div_risk.ipynb

{
 "cells": [
  {
   "cell_type": "code",
   "execution_count": 1,
   "metadata": {},
   "outputs": [],
   "source": [
    "import pandas as pd\n",
    "import numpy as np\n",
    "from pandas_datareader import data as wb\n",
    "import matplotlib.pyplot as plt"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 2,
   "metadata": {},
   "outputs": [],
   "source": [
    "tickers = ['PG','MSFT']\n",
    "\n",
    "sec_data = pd.DataFrame()\n",
    "\n",
    "for t in tickers :\n",
    "    sec_data[t] = wb.DataReader(t,'quandl','2007-1-1','2018-3-1')['AdjClose']"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 3,
   "metadata": {},
   "outputs": [
    {
     "name": "stdout",
     "output_type": "stream",
     "text": [
      "<class 'pandas.core.frame.DataFrame'>\n",
      "DatetimeIndex: 2809 entries, 2018-03-01 to 2007-01-03\n",
      "Data columns (total 2 columns):\n",
      "PG      2809 non-null float64\n",
      "MSFT    2809 non-null float64\n",
      "dtypes: float64(2)\n",
      "memory usage: 65.8 KB\n"
     ]
    }
   ],
   "source": [
    "sec_data.info()"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 4,
   "metadata": {},
   "outputs": [
    {
     "data": {
      "text/html": [
       "<div>\n",
       "<style scoped>\n",
       "    .dataframe tbody tr th:only-of-type {\n",
       "        vertical-align: middle;\n",
       "    }\n",
       "\n",
       "    .dataframe tbody tr th {\n",
       "        vertical-align: top;\n",
       "    }\n",
       "\n",
       "    .dataframe thead th {\n",
       "        text-align: right;\n",
       "    }\n",
       "</style>\n",
       "<table border=\"1\" class=\"dataframe\">\n",
       "  <thead>\n",
       "    <tr style=\"text-align: right;\">\n",
       "      <th></th>\n",
       "      <th>PG</th>\n",
       "      <th>MSFT</th>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>Date</th>\n",
       "      <th></th>\n",
       "      <th></th>\n",
       "    </tr>\n",
       "  </thead>\n",
       "  <tbody>\n",
       "    <tr>\n",
       "      <th>2007-01-03</th>\n",
       "      <td>NaN</td>\n",
       "      <td>NaN</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-04</th>\n",
       "      <td>-0.007621</td>\n",
       "      <td>-0.001676</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-05</th>\n",
       "      <td>-0.008624</td>\n",
       "      <td>-0.005719</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-08</th>\n",
       "      <td>0.002202</td>\n",
       "      <td>0.009737</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-09</th>\n",
       "      <td>-0.002517</td>\n",
       "      <td>0.001002</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-10</th>\n",
       "      <td>0.011901</td>\n",
       "      <td>-0.010064</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-11</th>\n",
       "      <td>0.006207</td>\n",
       "      <td>0.034463</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-12</th>\n",
       "      <td>0.005554</td>\n",
       "      <td>0.016476</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-16</th>\n",
       "      <td>0.000000</td>\n",
       "      <td>-0.001603</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-17</th>\n",
       "      <td>0.010255</td>\n",
       "      <td>-0.001927</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-18</th>\n",
       "      <td>0.002750</td>\n",
       "      <td>-0.003221</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-19</th>\n",
       "      <td>0.008357</td>\n",
       "      <td>0.003542</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-22</th>\n",
       "      <td>-0.005614</td>\n",
       "      <td>-0.012615</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-23</th>\n",
       "      <td>-0.001218</td>\n",
       "      <td>0.000651</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-24</th>\n",
       "      <td>-0.001982</td>\n",
       "      <td>0.011321</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-25</th>\n",
       "      <td>-0.009047</td>\n",
       "      <td>-0.020800</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-26</th>\n",
       "      <td>-0.000925</td>\n",
       "      <td>0.004914</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-29</th>\n",
       "      <td>0.000308</td>\n",
       "      <td>-0.002290</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-30</th>\n",
       "      <td>-0.004480</td>\n",
       "      <td>-0.001639</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-01-31</th>\n",
       "      <td>0.004326</td>\n",
       "      <td>0.012390</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-02-01</th>\n",
       "      <td>0.007219</td>\n",
       "      <td>-0.009769</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-02-02</th>\n",
       "      <td>0.000000</td>\n",
       "      <td>-0.012181</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-02-05</th>\n",
       "      <td>-0.002912</td>\n",
       "      <td>-0.019399</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-02-06</th>\n",
       "      <td>-0.008633</td>\n",
       "      <td>-0.003383</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-02-07</th>\n",
       "      <td>-0.001705</td>\n",
       "      <td>-0.004755</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-02-08</th>\n",
       "      <td>0.001705</td>\n",
       "      <td>-0.003752</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-02-09</th>\n",
       "      <td>-0.002480</td>\n",
       "      <td>-0.009615</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-02-12</th>\n",
       "      <td>-0.004199</td>\n",
       "      <td>-0.001381</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-02-13</th>\n",
       "      <td>0.008536</td>\n",
       "      <td>0.005857</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2007-02-14</th>\n",
       "      <td>0.002624</td>\n",
       "      <td>0.013354</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>...</th>\n",
       "      <td>...</td>\n",
       "      <td>...</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-01-18</th>\n",
       "      <td>-0.011247</td>\n",
       "      <td>-0.000444</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-01-19</th>\n",
       "      <td>0.009821</td>\n",
       "      <td>-0.001110</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-01-22</th>\n",
       "      <td>0.008964</td>\n",
       "      <td>0.017731</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-01-23</th>\n",
       "      <td>-0.031394</td>\n",
       "      <td>0.003161</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-01-24</th>\n",
       "      <td>-0.008345</td>\n",
       "      <td>-0.000871</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-01-25</th>\n",
       "      <td>0.000340</td>\n",
       "      <td>0.005539</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-01-26</th>\n",
       "      <td>-0.006929</td>\n",
       "      <td>0.018564</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-01-29</th>\n",
       "      <td>-0.009966</td>\n",
       "      <td>-0.001490</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-01-30</th>\n",
       "      <td>0.001036</td>\n",
       "      <td>-0.012643</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-01-31</th>\n",
       "      <td>-0.007040</td>\n",
       "      <td>0.024182</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-01</th>\n",
       "      <td>-0.005691</td>\n",
       "      <td>-0.007925</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-02</th>\n",
       "      <td>-0.018813</td>\n",
       "      <td>-0.026663</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-05</th>\n",
       "      <td>-0.038599</td>\n",
       "      <td>-0.030196</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-06</th>\n",
       "      <td>0.016153</td>\n",
       "      <td>0.025281</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-07</th>\n",
       "      <td>-0.006577</td>\n",
       "      <td>-0.019012</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-08</th>\n",
       "      <td>-0.019993</td>\n",
       "      <td>-0.054111</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-09</th>\n",
       "      <td>-0.003747</td>\n",
       "      <td>0.037116</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-12</th>\n",
       "      <td>0.017489</td>\n",
       "      <td>0.011623</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-13</th>\n",
       "      <td>0.002088</td>\n",
       "      <td>0.007823</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-14</th>\n",
       "      <td>-0.010112</td>\n",
       "      <td>0.010850</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-15</th>\n",
       "      <td>0.021216</td>\n",
       "      <td>0.020167</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-16</th>\n",
       "      <td>0.002303</td>\n",
       "      <td>-0.007148</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-20</th>\n",
       "      <td>-0.015372</td>\n",
       "      <td>0.007796</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-21</th>\n",
       "      <td>-0.013616</td>\n",
       "      <td>-0.013355</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-22</th>\n",
       "      <td>0.007450</td>\n",
       "      <td>0.002729</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-23</th>\n",
       "      <td>0.002594</td>\n",
       "      <td>0.024974</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-26</th>\n",
       "      <td>0.007131</td>\n",
       "      <td>0.014355</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-27</th>\n",
       "      <td>-0.013443</td>\n",
       "      <td>-0.012868</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-02-28</th>\n",
       "      <td>-0.025401</td>\n",
       "      <td>-0.004575</td>\n",
       "    </tr>\n",
       "    <tr>\n",
       "      <th>2018-03-01</th>\n",
       "      <td>0.002290</td>\n",
       "      <td>-0.009860</td>\n",
       "    </tr>\n",
       "  </tbody>\n",
       "</table>\n",
       "<p>2809 rows × 2 columns</p>\n",
       "</div>"
      ],
      "text/plain": [
       "                  PG      MSFT\n",
       "Date                          \n",
       "2007-01-03       NaN       NaN\n",
       "2007-01-04 -0.007621 -0.001676\n",
       "2007-01-05 -0.008624 -0.005719\n",
       "2007-01-08  0.002202  0.009737\n",
       "2007-01-09 -0.002517  0.001002\n",
       "2007-01-10  0.011901 -0.010064\n",
       "2007-01-11  0.006207  0.034463\n",
       "2007-01-12  0.005554  0.016476\n",
       "2007-01-16  0.000000 -0.001603\n",
       "2007-01-17  0.010255 -0.001927\n",
       "2007-01-18  0.002750 -0.003221\n",
       "2007-01-19  0.008357  0.003542\n",
       "2007-01-22 -0.005614 -0.012615\n",
       "2007-01-23 -0.001218  0.000651\n",
       "2007-01-24 -0.001982  0.011321\n",
       "2007-01-25 -0.009047 -0.020800\n",
       "2007-01-26 -0.000925  0.004914\n",
       "2007-01-29  0.000308 -0.002290\n",
       "2007-01-30 -0.004480 -0.001639\n",
       "2007-01-31  0.004326  0.012390\n",
       "2007-02-01  0.007219 -0.009769\n",
       "2007-02-02  0.000000 -0.012181\n",
       "2007-02-05 -0.002912 -0.019399\n",
       "2007-02-06 -0.008633 -0.003383\n",
       "2007-02-07 -0.001705 -0.004755\n",
       "2007-02-08  0.001705 -0.003752\n",
       "2007-02-09 -0.002480 -0.009615\n",
       "2007-02-12 -0.004199 -0.001381\n",
       "2007-02-13  0.008536  0.005857\n",
       "2007-02-14  0.002624  0.013354\n",
       "...              ...       ...\n",
       "2018-01-18 -0.011247 -0.000444\n",
       "2018-01-19  0.009821 -0.001110\n",
       "2018-01-22  0.008964  0.017731\n",
       "2018-01-23 -0.031394  0.003161\n",
       "2018-01-24 -0.008345 -0.000871\n",
       "2018-01-25  0.000340  0.005539\n",
       "2018-01-26 -0.006929  0.018564\n",
       "2018-01-29 -0.009966 -0.001490\n",
       "2018-01-30  0.001036 -0.012643\n",
       "2018-01-31 -0.007040  0.024182\n",
       "2018-02-01 -0.005691 -0.007925\n",
       "2018-02-02 -0.018813 -0.026663\n",
       "2018-02-05 -0.038599 -0.030196\n",
       "2018-02-06  0.016153  0.025281\n",
       "2018-02-07 -0.006577 -0.019012\n",
       "2018-02-08 -0.019993 -0.054111\n",
       "2018-02-09 -0.003747  0.037116\n",
       "2018-02-12  0.017489  0.011623\n",
       "2018-02-13  0.002088  0.007823\n",
       "2018-02-14 -0.010112  0.010850\n",
       "2018-02-15  0.021216  0.020167\n",
       "2018-02-16  0.002303 -0.007148\n",
       "2018-02-20 -0.015372  0.007796\n",
       "2018-02-21 -0.013616 -0.013355\n",
       "2018-02-22  0.007450  0.002729\n",
       "2018-02-23  0.002594  0.024974\n",
       "2018-02-26  0.007131  0.014355\n",
       "2018-02-27 -0.013443 -0.012868\n",
       "2018-02-28 -0.025401 -0.004575\n",
       "2018-03-01  0.002290 -0.009860\n",
       "\n",
       "[2809 rows x 2 columns]"
      ]
     },
     "execution_count": 4,
     "metadata": {},
     "output_type": "execute_result"
    }
   ],
   "source": [
    "sec_data = sec_data.iloc[::-1]\n",
    "sec_returns = np.log(sec_data / sec_data.shift(1))\n",
    "sec_returns"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 5,
   "metadata": {},
   "outputs": [],
   "source": [
    "weights = np.array([0.5,0.5])"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 12,
   "metadata": {},
   "outputs": [],
   "source": [
    "PG_var_a = sec_returns['PG'].var() * 250\n",
    "MSFT_var_a = sec_returns['MSFT'].var() * 250"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 13,
   "metadata": {},
   "outputs": [
    {
     "name": "stdout",
     "output_type": "stream",
     "text": [
      "0.03676485457868782\n",
      "3.676 %\n"
     ]
    }
   ],
   "source": [
    "pfolio_var = np.dot(weights.T,np.dot(sec_returns.cov() * 250,weights))\n",
    "print(pfolio_var)\n",
    "print(str(round(pfolio_var * 100,3)) + ' %')"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 9,
   "metadata": {},
   "outputs": [
    {
     "name": "stdout",
     "output_type": "stream",
     "text": [
      "1.082 %\n"
     ]
    }
   ],
   "source": [
    "#diversifiable risk\n",
    "dr = pfolio_var - (weights[0] ** 2 * PG_var_a) - (weights[1] ** 2 * MSFT_var_a)\n",
    "print(str(round(dr*100,3)) + ' %')"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 10,
   "metadata": {},
   "outputs": [
    {
     "name": "stdout",
     "output_type": "stream",
     "text": [
      "2.595 %\n"
     ]
    }
   ],
   "source": [
    "#non-diversifiable risk\n",
    "n_dr_1 = pfolio_var - dr\n",
    "print(str(round(n_dr_1*100,3)) + ' %')"
   ]
  },
  {
   "cell_type": "code",
   "execution_count": 14,
   "metadata": {},
   "outputs": [
    {
     "name": "stdout",
     "output_type": "stream",
     "text": [
      "2.595 %\n"
     ]
    }
   ],
   "source": [
    "n_dr_2 = (weights[0] ** 2 * PG_var_a) + (weights[1] ** 2 * MSFT_var_a)\n",
    "print(str(round(n_dr_2*100,3)) + ' %')"
   ]
  }
 ],
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