cesarvargas00 · November 3, 2020 23:08 · Nov 3, 2020 · Nov 3, 2020 · Oct 29, 2020 · Oct 29, 2020
diff --git a/markowitz.js b/markowitz.js
@@ -48,7 +48,7 @@ function markowitz(portfolio) {
     const variance = returns.reduce((acc, r) => (r - mean) ** 2 + acc, 0) / n
     const stdev = variance ** 0.5
     const close = portfolio[i].returns[portfolio[i].returns.length-1]
-    assets.push({ symbol, returns, amount, mean, variance, stdev, close })
+    assets.push({ portfolio[i].symbol, returns, portfolio[i].amount, mean, variance, stdev, close })
   }
 
   const correlations = {}

diff --git a/markowitz.js b/markowitz.js
@@ -33,22 +33,22 @@ function covariancesFromCorrelations(correlations, stdevs) {
     {}
   )
 }
-// portfolio = [{symbol, returns, amount}]
+// portfolio = [{symbol, closes, amount}]
 function markowitz(portfolio) {
-  const assets = []
+  let assets = []
   for (let i = 0; i < portfolio.length; i++) {
     const returns = []
-    for (let i = 1; i < portfolio.returns.length; i++) {
+    for (let j = 1; j < portfolio[i].closes.length; j++) {
       returns.push(
-        Math.log(portfolio.returns[i] / portfolio.returns[i-1])
+        Math.log(portfolio[i].closes[j] / portfolio[i].closes[j-1])
       )
     }
     const n = returns.length
     const mean = returns.reduce((acc, r) => r + acc, 0) / n
     const variance = returns.reduce((acc, r) => (r - mean) ** 2 + acc, 0) / n
     const stdev = variance ** 0.5
-    const close = data[data.length - 1]
-    returns.push({ symbol, returns, amount, mean, variance, stdev, close })
+    const close = portfolio[i].returns[portfolio[i].returns.length-1]
+    assets.push({ symbol, returns, amount, mean, variance, stdev, close })
   }
 
   const correlations = {}

diff --git a/markowitz.js b/markowitz.js
@@ -40,7 +40,7 @@ function markowitz(portfolio) {
     const returns = []
     for (let i = 1; i < portfolio.returns.length; i++) {
       returns.push(
-        Math.log(portfolio.returns[i-1] / portfolio.returns[i])
+        Math.log(portfolio.returns[i] / portfolio.returns[i-1])
       )
     }
     const n = returns.length

diff --git a/markowitz.js b/markowitz.js
@@ -40,8 +40,7 @@ function markowitz(portfolio) {
     const returns = []
     for (let i = 1; i < portfolio.returns.length; i++) {
       returns.push(
-        (portfolio.returns[i] - portfolio.returns[i - 1]) /
-          portfolio.returns[i - 1]
+        Math.log(portfolio.returns[i-1] / portfolio.returns[i])
       )
     }
     const n = returns.length

diff --git a/markowitz.js b/markowitz.js
@@ -1,8 +1,8 @@
-function correlation(x, xMean, y, yMean) {
+function correlation(x, y) {
   if (x.length !== y.length) return null
 
-  xMean = xMean / x.length
-  yMean = yMean / y.length
+  const xMean = x.reduce((acc, el) => el + acc, 0) / x.length
+  const yMean = y.reduce((acc, el) => el + acc, 0) / y.length
 
   let numerator = 0,
     xDSquaredSum = 0,
@@ -60,9 +60,7 @@ function markowitz(portfolio) {
       }
       correlations[assets[i].symbol][assets[j].symbol] = correlation(
         assets[i].returns,
-        assets[i].mean,
-        assets[j].returns,
-        assets[j].mean
+        assets[j].returns
       )
     }
   }

diff --git a/markowitz.js b/markowitz.js
@@ -0,0 +1,93 @@
+function correlation(x, xMean, y, yMean) {
+  if (x.length !== y.length) return null
+
+  xMean = xMean / x.length
+  yMean = yMean / y.length
+
+  let numerator = 0,
+    xDSquaredSum = 0,
+    yDSquaredSum = 0
+
+  for (let i = 0; i < x.length; i++) {
+    const xd = x[i] - xMean
+    const yd = y[i] - yMean
+    numerator += xd * yd
+    xDSquaredSum += xd ** 2
+    yDSquaredSum += yd ** 2
+  }
+  return numerator / (xDSquaredSum * yDSquaredSum) ** 0.5
+}
+
+function covariancesFromCorrelations(correlations, stdevs) {
+  return Object.keys(correlations).reduce(
+    (acc, row) => ({
+      ...acc,
+      [row]: Object.keys(correlations[row]).reduce(
+        (acc, col) => ({
+          ...acc,
+          [col]: correlations[row][col] * stdevs[row] * stdevs[col],
+        }),
+        {}
+      ),
+    }),
+    {}
+  )
+}
+// portfolio = [{symbol, returns, amount}]
+function markowitz(portfolio) {
+  const assets = []
+  for (let i = 0; i < portfolio.length; i++) {
+    const returns = []
+    for (let i = 1; i < portfolio.returns.length; i++) {
+      returns.push(
+        (portfolio.returns[i] - portfolio.returns[i - 1]) /
+          portfolio.returns[i - 1]
+      )
+    }
+    const n = returns.length
+    const mean = returns.reduce((acc, r) => r + acc, 0) / n
+    const variance = returns.reduce((acc, r) => (r - mean) ** 2 + acc, 0) / n
+    const stdev = variance ** 0.5
+    const close = data[data.length - 1]
+    returns.push({ symbol, returns, amount, mean, variance, stdev, close })
+  }
+
+  const correlations = {}
+  for (let i = 0; i < assets.length; i++) {
+    for (let j = 0; j < assets.length; j++) {
+      if (typeof correlations[assets[i].symbol] === 'undefined') {
+        correlations[assets[i].symbol] = {}
+      }
+      correlations[assets[i].symbol][assets[j].symbol] = correlation(
+        assets[i].returns,
+        assets[i].mean,
+        assets[j].returns,
+        assets[j].mean
+      )
+    }
+  }
+  const stdevs = assets.reduce(
+    (acc, asset) => ({ ...acc, [asset.symbol]: asset.stdev }),
+    {}
+  )
+  const covariances = covariancesFromCorrelations(correlations, stdevs)
+
+  const total = assets.reduce(
+    (acc, { amount, close }) => acc + amount * close,
+    0
+  )
+  const w = assets.map(({ amount, close }) => (amount * close) / total)
+  const Ω = Object.keys(covariances).map(k =>
+    Object.keys(covariances[k]).map(l => covariances[k][l])
+  )
+
+  let r = 0
+  for (let i = 0; i < w.length; i++) {
+    let sum = 0
+    for (let j = 0; j < w.length; j++) {
+      sum += Ω[i][j] * w[j]
+    }
+    r += sum * w[i]
+  }
+  return r ** 0.5
+}
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