How to pick uncorrelated stocks for an investment portfolio in Python

Portfolio investing is a fascinating kind of investment that can potentially lead to satisfactory returns. According to Modern Portfolio Theory, it’s always a good idea to select stocks or ETFs that show a low correlation.

Let’s see why and how to select stocks measuring their correlation in Python.

Note from Towards Data Science’s editors:_ While we allow independent authors to publish articles in accordance with our rules and guidelines, we do not endorse each author’s contribution. You should not rely on an author’s works without seeking professional advice. See our Reader Terms for details._

What is linear correlation?

Correlation between stocks is a measure of how the returns of a stock interfere with the returns of another one. If two stocks are highly correlated, they will likely move in the same direction (i.e. if a stock price rises, the other stock price rises too) or in the opposite direction.

Mathematically speaking, the linear correlation index between two stocks, say a and b, is defined as:

where the numerator is the covariance between the stocks and denominator is the product of the standard deviations.

This number spans from -1 to 1. If it’s -1, the stocks move in the opposite directions (i.e. if one stock rises, the other stock goes down), if it’s equal to 1, the stock move perfectly in the same direction. If it’s equal to 0, the stocks are uncorrelated and their movements are independent of each other. We must look for these uncorrelated stocks.

Why should we select uncorrelated stocks?

If we build a portfolio made by some stocks and their weights are x, the variance of the portfolio is:

So, as long as the correlation between stocks is positive, the variance of our portfolio increases with respect to the sum of the variances and so does its risk. Some may argue that we would like stocks that are negatively correlated, but in this case, there wouldn’t be any return, because if a stock rises, the other stock falls and the net return is 0.

So, the idea is to keep our stocks uncorrelated in order to remove the second term and avoid a higher variance. That is the purpose of a branch of Modern Portfolio Theory and there are mathematical tools that allow us to optimize variance according to the weights x. For this article, we are going to focus on selecting those stocks that show an absolute value of the linear correlation nearly equal to 0.

#python #data-science #finance #investing #portfolio

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Why use Python for Software Development

No programming language is pretty much as diverse as Python. It enables building cutting edge applications effortlessly. Developers are as yet investigating the full capability of end-to-end Python development services in various areas. 

By areas, we mean FinTech, HealthTech, InsureTech, Cybersecurity, and that's just the beginning. These are New Economy areas, and Python has the ability to serve every one of them. The vast majority of them require massive computational abilities. Python's code is dynamic and powerful - equipped for taking care of the heavy traffic and substantial algorithmic capacities. 

Programming advancement is multidimensional today. Endeavor programming requires an intelligent application with AI and ML capacities. Shopper based applications require information examination to convey a superior client experience. Netflix, Trello, and Amazon are genuine instances of such applications. Python assists with building them effortlessly. 

5 Reasons to Utilize Python for Programming Web Apps 

Python can do such numerous things that developers can't discover enough reasons to admire it. Python application development isn't restricted to web and enterprise applications. It is exceptionally adaptable and superb for a wide range of uses.

Robust frameworks 

Python is known for its tools and frameworks. There's a structure for everything. Django is helpful for building web applications, venture applications, logical applications, and mathematical processing. Flask is another web improvement framework with no conditions. 

Web2Py, CherryPy, and Falcon offer incredible capabilities to customize Python development services. A large portion of them are open-source frameworks that allow quick turn of events. 

Simple to read and compose 

Python has an improved sentence structure - one that is like the English language. New engineers for Python can undoubtedly understand where they stand in the development process. The simplicity of composing allows quick application building. 

The motivation behind building Python, as said by its maker Guido Van Rossum, was to empower even beginner engineers to comprehend the programming language. The simple coding likewise permits developers to roll out speedy improvements without getting confused by pointless subtleties. 

Utilized by the best 

Alright - Python isn't simply one more programming language. It should have something, which is the reason the business giants use it. Furthermore, that too for different purposes. Developers at Google use Python to assemble framework organization systems, parallel information pusher, code audit, testing and QA, and substantially more. Netflix utilizes Python web development services for its recommendation algorithm and media player. 

Massive community support 

Python has a steadily developing community that offers enormous help. From amateurs to specialists, there's everybody. There are a lot of instructional exercises, documentation, and guides accessible for Python web development solutions. 

Today, numerous universities start with Python, adding to the quantity of individuals in the community. Frequently, Python designers team up on various tasks and help each other with algorithmic, utilitarian, and application critical thinking. 

Progressive applications 

Python is the greatest supporter of data science, Machine Learning, and Artificial Intelligence at any enterprise software development company. Its utilization cases in cutting edge applications are the most compelling motivation for its prosperity. Python is the second most well known tool after R for data analytics.

The simplicity of getting sorted out, overseeing, and visualizing information through unique libraries makes it ideal for data based applications. TensorFlow for neural networks and OpenCV for computer vision are two of Python's most well known use cases for Machine learning applications.

Summary

Thinking about the advances in programming and innovation, Python is a YES for an assorted scope of utilizations. Game development, web application development services, GUI advancement, ML and AI improvement, Enterprise and customer applications - every one of them uses Python to its full potential. 

The disadvantages of Python web improvement arrangements are regularly disregarded by developers and organizations because of the advantages it gives. They focus on quality over speed and performance over blunders. That is the reason it's a good idea to utilize Python for building the applications of the future.

#python development services #python development company #python app development #python development #python in web development #python software development

How to pick uncorrelated stocks for an investment portfolio in Python

Portfolio investing is a fascinating kind of investment that can potentially lead to satisfactory returns. According to Modern Portfolio Theory, it’s always a good idea to select stocks or ETFs that show a low correlation.

Let’s see why and how to select stocks measuring their correlation in Python.

Note from Towards Data Science’s editors:_ While we allow independent authors to publish articles in accordance with our rules and guidelines, we do not endorse each author’s contribution. You should not rely on an author’s works without seeking professional advice. See our Reader Terms for details._

What is linear correlation?

Correlation between stocks is a measure of how the returns of a stock interfere with the returns of another one. If two stocks are highly correlated, they will likely move in the same direction (i.e. if a stock price rises, the other stock price rises too) or in the opposite direction.

Mathematically speaking, the linear correlation index between two stocks, say a and b, is defined as:

where the numerator is the covariance between the stocks and denominator is the product of the standard deviations.

This number spans from -1 to 1. If it’s -1, the stocks move in the opposite directions (i.e. if one stock rises, the other stock goes down), if it’s equal to 1, the stock move perfectly in the same direction. If it’s equal to 0, the stocks are uncorrelated and their movements are independent of each other. We must look for these uncorrelated stocks.

Why should we select uncorrelated stocks?

If we build a portfolio made by some stocks and their weights are x, the variance of the portfolio is:

So, as long as the correlation between stocks is positive, the variance of our portfolio increases with respect to the sum of the variances and so does its risk. Some may argue that we would like stocks that are negatively correlated, but in this case, there wouldn’t be any return, because if a stock rises, the other stock falls and the net return is 0.

So, the idea is to keep our stocks uncorrelated in order to remove the second term and avoid a higher variance. That is the purpose of a branch of Modern Portfolio Theory and there are mathematical tools that allow us to optimize variance according to the weights x. For this article, we are going to focus on selecting those stocks that show an absolute value of the linear correlation nearly equal to 0.

#python #data-science #finance #investing #portfolio

Python Tricks Every Developer Should Know

Python is awesome, it’s one of the easiest languages with simple and intuitive syntax but wait, have you ever thought that there might ways to write your python code simpler?

In this tutorial, you’re going to learn a variety of Python tricks that you can use to write your Python code in a more readable and efficient way like a pro.

Let’s get started

Swapping value in Python

Instead of creating a temporary variable to hold the value of the one while swapping, you can do this instead

>>> FirstName = "kalebu"
>>> LastName = "Jordan"
>>> FirstName, LastName = LastName, FirstName 
>>> print(FirstName, LastName)
('Jordan', 'kalebu')

#python #python-programming #python3 #python-tutorials #learn-python #python-tips #python-skills #python-development

How to Remove all Duplicate Files on your Drive via Python

Today you’re going to learn how to use Python programming in a way that can ultimately save a lot of space on your drive by removing all the duplicates.

Intro

In many situations you may find yourself having duplicates files on your disk and but when it comes to tracking and checking them manually it can tedious.

Heres a solution

Instead of tracking throughout your disk to see if there is a duplicate, you can automate the process using coding, by writing a program to recursively track through the disk and remove all the found duplicates and that’s what this article is about.

But How do we do it?

If we were to read the whole file and then compare it to the rest of the files recursively through the given directory it will take a very long time, then how do we do it?

The answer is hashing, with hashing can generate a given string of letters and numbers which act as the identity of a given file and if we find any other file with the same identity we gonna delete it.

There’s a variety of hashing algorithms out there such as

• md5
• sha1
• sha224, sha256, sha384 and sha512

#python-programming #python-tutorials #learn-python #python-project #python3 #python #python-skills #python-tips