Backtesting balancing of a portfolio

leszek

#1

5/5/2014 5:57 PM

I hear all the time that balancing a portfolio is the way to go, so I decided to backtest that theory. I wrote a PosSizer and a script that allows me to optimize percentages of different symbols as well as the holding period. For anyone interested here's the strategy code:

CODE:
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and here's the PosSizer:

CODE:
Please log in to see this code.

Size:

Color:

I hear all the time that balancing a portfolio is the way to go, so I decided to backtest that theory.  I wrote a PosSizer and a script that allows me to optimize percentages of different symbols as well as the holding period.  For anyone interested here's the strategy code:

[code]using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;
using WealthLab.PosSizers;

namespace WealthLab.Strategies
{
	public class RebalanceStrategy : WealthScript
	{
		/////////////////////////////////
		// config
		/////////////////////////////////
		bool debugOut = true;
		string entry1symbol = "Selected Symbol";
		string entry2symbol = "IEF";
		string entry3symbol = "GLD";
		int numEntries = 3;
		/////////////////////////////////

StrategyParameter entry1portion;
		StrategyParameter entry2portion;
		StrategyParameter entry3portion;
		StrategyParameter holdingPeriod;
		Tuple<string, double>[] symInfos;

public RebalanceStrategy()
		{
			entry1portion = CreateParameter(entry1symbol + " portfolio percentage", 30, 0, 100, 5);
			entry2portion = CreateParameter(entry2symbol + " portfolio percentage", 30, 0, 100, 5);
			entry3portion = CreateParameter(entry3symbol + " portfolio percentage", 30, 0, 100, 5);
			holdingPeriod = CreateParameter("holding period", 60, 5, 200, 5);
			
			symInfos = new Tuple<string, double>[numEntries];
			Examples.MultiPosSizer.SymInfos = symInfos;
		}
		
		
		private void OnLog(object sender, Examples.SizerMessageEventArgs args)
		{
			PrintDebug(args.Message);
		}
		
		protected override void Execute()
		{
			if (debugOut)
			{
				ClearDebug();
				Examples.MultiPosSizer.ResetLog();
				Examples.MultiPosSizer.LogMessage += OnLog;
			}
			
			// validation
			double total = 0;
			total += entry1portion.Value;
			total += entry2portion.Value;
			total += entry3portion.Value;
			if(total > 100)
			{
				if (debugOut)
					PrintDebug("Bailing out due to total percentage of holdings adding up to more than 100%, total=" + total);
				return;
			}

entry1symbol = Bars.Symbol;
			Bars entry1bars = Bars;
			Bars entry2bars = GetExternalSymbol(entry2symbol, true);
			Bars entry3bars = GetExternalSymbol(entry3symbol, true);
			ChartPane pane0 = null;
			ChartPane pane1 = null;
			
			symInfos[0] = new Tuple<string, double>(entry1symbol,entry1portion.Value/100.0);
			symInfos[1] = new Tuple<string, double>(entry2symbol,entry2portion.Value/100.0);
			symInfos[2] = new Tuple<string, double>(entry3symbol,entry3portion.Value/100.0);

pane0 = CreatePane(75, true, true);
			PlotSeries(pane0, entry2bars.Close, Color.BurlyWood, LineStyle.Solid, 2);
			pane1 = CreatePane(75, true, true);
			PlotSeries(pane1, entry3bars.Close, Color.BurlyWood, LineStyle.Solid, 2);

int holding = 0;
			for (int bar = 0; bar < Bars.Count; bar++)
			{
				if(0 == holding)
				{
					if(entry1bars.FirstActualBar <= bar)
					{
						SetContext(symInfos[0].Item1,true);
						BuyAtMarket(bar + 1, symInfos[0].Item1 + " buy");
						if (debugOut)
							PrintDebug(symInfos[0].Item1 + " Bought on " + Bars.Date[bar + 1]);
					}
					if(entry2bars.FirstActualBar <= bar)
					{
						SetContext(symInfos[1].Item1,true);
						BuyAtMarket(bar + 1, symInfos[1].Item1 + " buy");
						if (debugOut)
							PrintDebug(symInfos[1].Item1 + " Bought on " + Bars.Date[bar + 1]);
					}
					if(entry3bars.FirstActualBar <= bar)
					{
						SetContext(symInfos[2].Item1,true);
						BuyAtMarket(bar + 1, symInfos[2].Item1 + " buy");
						if (debugOut)
							PrintDebug(symInfos[2].Item1 + " Bought on " + Bars.Date[bar + 1]);
					}
					holding++;
				}
				else if(holding >= holdingPeriod.ValueInt)
				{
					foreach(Position p in Positions)
					{
						if(p.Active)
						{
							SellAtMarket(bar + 1, p, p.Symbol + " sell");
							if (debugOut)
								PrintDebug(p.Symbol + " Sold on " + Bars.Date[bar + 1] + ", profit = " + p.NetProfitAsOfBarPercent(bar + 1));
						}
					}
					holding = 0;
				}
				else
					holding++;
			}
		}
	}
}[/code]

and here's the PosSizer:

[code]using System;
using System.Collections.Generic;
using System.Linq;
using System.Text;
using System.Threading.Tasks;
using WealthLab;
using WealthLab.PosSizers;
using System.Windows.Forms;

namespace Examples
{
    public class SizerMessageEventArgs : EventArgs
    {
        public string Message { get; private set; }
        public SizerMessageEventArgs(string message) { this.Message = message; }
    }

public class MultiPosSizer : BasicPosSizer
    {
        #region globals accessible from strategy code
        
        // logging support allowing the sizer to send logs to the strategy code
        // strategy can then log this into DebugPrint() call
        public static event EventHandler<SizerMessageEventArgs> LogMessage = null;
        public static void ResetLog()
        {
            LogMessage = null;
        }

// array of symbol/percent pairs telling the sizer the percentage
        // of equity to allocate per symbol
        private static Tuple<string, double>[] syminfos = null;
        public static Tuple<string, double>[] SymInfos
        {
            get { return syminfos; }
            set { syminfos = value; }
        }
        
        #endregion

// raise the log event captured by the strategy code
        private void Log(string msg)
        {
            if (LogMessage != null)
            {
                SizerMessageEventArgs args = new SizerMessageEventArgs(msg);
                LogMessage(null, args);
            }
        }

#region BasicPosSizer overrides

// Friendly name
        public override string FriendlyName
        {
            get
            {
                return "Multiple Positions";
            }
        }

// Actual sizing
        public override double SizePosition(Position currentPos, Bars bars,
            int bar, double basisPrice, PositionType pt, double riskStopLevel,
            double equity, double cash)
        {
            if (MultiPosSizer.SymInfos == null)
            {
                Log("PosSizer error: symol position information array not setup!");
                return 0;
            }
            Tuple<string, double> symInfo = MultiPosSizer.SymInfos.FirstOrDefault(s => s != null && string.CompareOrdinal(s.Item1, bars.Symbol) == 0);
            if (symInfo == null)
            {
                Log("PosSizer error: symbol " + bars.Symbol + " not found in the position information array.");
                return 0;
            }

double target = equity * symInfo.Item2;
            double ret = (double)(int)(target / basisPrice);
            Log("Bar " + bar + ": " + "Buy " + ret + " of " + bars.Symbol + ", cash = " + cash + 
                ", equity = " + equity + "\n");
            return ret;
        }

#endregion
    }
}
[/code]

Eugene

#2

5/6/2014 2:47 AM

Excellent contribution, thank you.

ReneW

#3

11/3/2014 4:55 AM

Hello,

I wanted to test the mentioned "Balancing PosSizer" which has been introduced recently.

I tried the code from the WL wiki, the "Examples"-class was missing.

Luckily I found this additional piece of code above in this thread, but I was wondering
if this is really necessary. I had thougt that should be within the possizer library.

Furthermore, I have an issue with this strategy. Using the SPY as selected symbol
within the time period 1.1.2002 up to 31.12.2014 it seems to be ok.
Trades are generated and the performance is displayed by WL.

Using the time period 1.1.2003 up to 31.12.2014 (or any shorter time periode) no trades are generated within
the WL performance tabs..., they are only logged in the DEBUG and ERROR Log and not
send to WL.

What do I wrong ? I cannot find a configuration tab for the "Portfolio Balancing "- Sizer.

Addon: The trades, when displayed, are of size "1"....
I must have done something wrong here, but what ?
Normally this size should have been set within the possizer itself.

mcfalwell

#4

11/24/2014 9:45 AM

leszek - can I hire you to make some changes to this for me?

Eugene

#5

4/22/2015 1:31 AM

bishop asked in a duplicate thread:

Hi,

I am testing the aforementioned trading strategy and not sure if it works correctly.

I've created a watchlist of three symbols: AXP, BA, and CAT and assigned these symbols to each entrysymbol strings within the code and allocated 10% to each symbol.

In the Position Size window I've chosen Portfolio Rebalancing PosSizer.

When I run the strategy on the whole watchlist, I can see the following:

1. For some reason, some trades are not included due to insufficient capital (even with 2-to-1 margin)
2. The second symbol (which is BA in my case) returns an error: PosSizer error: symbol BA not found in the position information array.
3. The strategy places 2 or 3 trades on one bar every time it enters the position

Is it all by design? Or I am missing something?

Thank you.

Eugene

#6

4/22/2015 3:01 AM

Hi,

I'm unable to reproduce neither one of your observations using Yahoo! EOD data (any data loading settings). There are no skipped trades, no error and the correct number number of entries (1). By the way, don't use the code above: it shouldn't work out of the box. I've just updated the Wiki page with a more actual Strategy code that takes into account the fact that leszek's PosSizer class was renamed when included in the MS123 PosSizers. Please rerun using updated code and see if it makes the error go away.

P.S.