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  3. Intermediate Portfolio Analysis in R

Exercise

Analyze results and compare to benchmark

In the previous exercises of the chapter, we created an equal weight benchmark r_benchmark and ran the following optimizations:

  • Minimize portfolio standard deviation with sample estimates (returns stored in returns_base).
  • Minimize portfolio standard deviation with percentage contribution to risk using sample estimates (returns stored in returns_rb).
  • Minimize portfolio standard deviation with percentage contribution to risk using robust estimates (returns stored in returns_rb_robust).

Now we wish to analyze the performance of the optimization backtests and compare with the benchmark.

Instructions

100 XP
  • Combine the returns of the benchmark portfolio and optimizations into a single xts object.
  • Compute and display the annualized returns.
  • Chart the cumulative return and drawdowns.