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Introduction to Portfolio Management with Python
course content

Course Content

Introduction to Portfolio Management with Python

Introduction to Portfolio Management with Python

1. Portfolio Analysis Basics
What You Will LearnInvesting BasicsWhat is Portfolio?Portfolio ReturnsMeasuring Risk of PortfolioAnnualized ReturnAnnualized Risk
2. Portfolio Optimization Basics
Risk Adjusted ReturnOverview of Modern Portfolio TheoryMarkowitz PortfoliosChallenge: Computing GMV PortfolioChallenge: Computing MSR Portfolio
3. Factor Investing
Introduction to Factor AnalysisThe Capital Asset Pricing ModelThe Fama-French Factor ModelThe 5-factor Model

bookAnnualized Risk

Now, we're going to discuss annualization in terms of risk.

In practice, it is defined in a way that is analogical to the annualized return, and majorly used for comparing risk of different assets.

Risk measured by standard deviation the annualized value can generally be calculated using the following formula:

So, for example, if we're working with monthly risk - then annualized one could be computed using the next expression:

Or, in case of daily risk, to annualize we use time period equal to 252, since it is an approximate number of trading days in a year (excluding weekends and holidays), and the following expression is used for computing:

Below is a code example for computing annualized risks for the instance provided above:


              
123456789

            
# Computing annualized risk for Nvidia
Nvidia_annualized = 0.007 * 252 ** 0.5
print('Nvidia:')
print(Nvidia_annualized)

# Computing annualized risk for AMD
AMD_annualized = 0.03 * 12 ** 0.5
print('AMD:')
print(AMD_annualized)
copy

Task

In this task you need to:

  1. Compute the annualized risk vol_sony_annualized for the Sony Group Corporation stocks, using the given daily risk vol_sony, by defining the required time period T_sony, and applying the formula for annualized risk.
  2. Compute the annualized risk vol_cola_annualized for the Coca-Cola Company stocks, using the given monthly risk vol_cola, by defining the required time period T_cola, and applying the formula for annualized risk.

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Everything was clear?

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Section 1. Chapter 7
toggle bottom row

bookAnnualized Risk

Now, we're going to discuss annualization in terms of risk.

In practice, it is defined in a way that is analogical to the annualized return, and majorly used for comparing risk of different assets.

Risk measured by standard deviation the annualized value can generally be calculated using the following formula:

So, for example, if we're working with monthly risk - then annualized one could be computed using the next expression:

Or, in case of daily risk, to annualize we use time period equal to 252, since it is an approximate number of trading days in a year (excluding weekends and holidays), and the following expression is used for computing:

Below is a code example for computing annualized risks for the instance provided above:


              
123456789

            
# Computing annualized risk for Nvidia
Nvidia_annualized = 0.007 * 252 ** 0.5
print('Nvidia:')
print(Nvidia_annualized)

# Computing annualized risk for AMD
AMD_annualized = 0.03 * 12 ** 0.5
print('AMD:')
print(AMD_annualized)
copy

Task

In this task you need to:

  1. Compute the annualized risk vol_sony_annualized for the Sony Group Corporation stocks, using the given daily risk vol_sony, by defining the required time period T_sony, and applying the formula for annualized risk.
  2. Compute the annualized risk vol_cola_annualized for the Coca-Cola Company stocks, using the given monthly risk vol_cola, by defining the required time period T_cola, and applying the formula for annualized risk.

Switch to desktopSwitch to desktop for real-world practiceContinue from where you are using one of the options below
Everything was clear?

How can we improve it?

Thanks for your feedback!

Section 1. Chapter 7
toggle bottom row

bookAnnualized Risk

Now, we're going to discuss annualization in terms of risk.

In practice, it is defined in a way that is analogical to the annualized return, and majorly used for comparing risk of different assets.

Risk measured by standard deviation the annualized value can generally be calculated using the following formula:

So, for example, if we're working with monthly risk - then annualized one could be computed using the next expression:

Or, in case of daily risk, to annualize we use time period equal to 252, since it is an approximate number of trading days in a year (excluding weekends and holidays), and the following expression is used for computing:

Below is a code example for computing annualized risks for the instance provided above:


              
123456789

            
# Computing annualized risk for Nvidia
Nvidia_annualized = 0.007 * 252 ** 0.5
print('Nvidia:')
print(Nvidia_annualized)

# Computing annualized risk for AMD
AMD_annualized = 0.03 * 12 ** 0.5
print('AMD:')
print(AMD_annualized)
copy

Task

In this task you need to:

  1. Compute the annualized risk vol_sony_annualized for the Sony Group Corporation stocks, using the given daily risk vol_sony, by defining the required time period T_sony, and applying the formula for annualized risk.
  2. Compute the annualized risk vol_cola_annualized for the Coca-Cola Company stocks, using the given monthly risk vol_cola, by defining the required time period T_cola, and applying the formula for annualized risk.

Switch to desktopSwitch to desktop for real-world practiceContinue from where you are using one of the options below
Everything was clear?

How can we improve it?

Thanks for your feedback!

Now, we're going to discuss annualization in terms of risk.

In practice, it is defined in a way that is analogical to the annualized return, and majorly used for comparing risk of different assets.

Risk measured by standard deviation the annualized value can generally be calculated using the following formula:

So, for example, if we're working with monthly risk - then annualized one could be computed using the next expression:

Or, in case of daily risk, to annualize we use time period equal to 252, since it is an approximate number of trading days in a year (excluding weekends and holidays), and the following expression is used for computing:

Below is a code example for computing annualized risks for the instance provided above:


              
123456789

            
# Computing annualized risk for Nvidia
Nvidia_annualized = 0.007 * 252 ** 0.5
print('Nvidia:')
print(Nvidia_annualized)

# Computing annualized risk for AMD
AMD_annualized = 0.03 * 12 ** 0.5
print('AMD:')
print(AMD_annualized)
copy

Task

In this task you need to:

  1. Compute the annualized risk vol_sony_annualized for the Sony Group Corporation stocks, using the given daily risk vol_sony, by defining the required time period T_sony, and applying the formula for annualized risk.
  2. Compute the annualized risk vol_cola_annualized for the Coca-Cola Company stocks, using the given monthly risk vol_cola, by defining the required time period T_cola, and applying the formula for annualized risk.

Switch to desktopSwitch to desktop for real-world practiceContinue from where you are using one of the options below
Section 1. Chapter 7
Switch to desktopSwitch to desktop for real-world practiceContinue from where you are using one of the options below
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