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<!doctype html><html lang=en dir=ltr class="blog-wrapper blog-post-page plugin-blog plugin-id-default" data-has-hydrated=false><meta charset=UTF-8><meta name=generator content="Docusaurus v3.6.0"><title data-rh=true>Profitability using the investment formula | The Old Speice Guy</title><meta data-rh=true name=viewport content="width=device-width,initial-scale=1.0"><meta data-rh=true name=twitter:card content=summary_large_image><meta data-rh=true property=og:url content=https://speice.io/2016/02/profitability-using-the-investment-formula><meta data-rh=true property=og:locale content=en><meta data-rh=true name=docusaurus_locale content=en><meta data-rh=true name=docusaurus_tag content=default><meta data-rh=true name=docsearch:language content=en><meta data-rh=true name=docsearch:docusaurus_tag content=default><meta data-rh=true property=og:title content="Profitability using the investment formula | The Old Speice Guy"><meta data-rh=true name=description content="After developing a formula to guide our investing, how do we actually evaluate its performance in the real world?"><meta data-rh=true property=og:description content="After developing a formula to guide our investing, how do we actually evaluate its performance in the real world?"><meta data-rh=true property=og:type content=article><meta data-rh=true property=article:published_time content=2016-02-26T12:00:00.000Z><link data-rh=true rel=icon href=/img/favicon.ico><link data-rh=true rel=canonical href=https://speice.io/2016/02/profitability-using-the-investment-formula><link data-rh=true rel=alternate href=https://speice.io/2016/02/profitability-using-the-investment-formula hreflang=en><link data-rh=true rel=alternate href=https://speice.io/2016/02/profitability-using-the-investment-formula hreflang=x-default><script data-rh=true type=application/ld+json>{"@context":"https://schema.org","@id":"https://speice.io/2016/02/profitability-using-the-investment-formula","@type":"BlogPosting","author":{"@type":"Person","name":"Bradlee Speice"},"dateModified":"2024-11-03T23:57:32.000Z","datePublished":"2016-02-26T12:00:00.000Z","description":"After developing a formula to guide our investing, how do we actually evaluate its performance in the real world?","headline":"Profitability using the investment formula","isPartOf":{"@id":"https://speice.io/","@type":"Blog","name":"Blog"},"keywords":[],"mainEntityOfPage":"https://speice.io/2016/02/profitability-using-the-investment-formula","name":"Profitability using the investment formula","url":"https://speice.io/2016/02/profitability-using-the-investment-formula"}</script><link rel=alternate type=application/rss+xml href=/rss.xml title="The Old Speice Guy RSS Feed"><link rel=alternate type=application/atom+xml href=/atom.xml title="The Old Speice Guy Atom Feed"><link rel=stylesheet href=https://cdn.jsdelivr.net/npm/katex@0.13.24/dist/katex.min.css integrity=sha384-odtC+0UGzzFL/6PNoE8rX/SPcQDXBJ+uRepguP4QkPCm2LBxH3FA3y+fKSiJ+AmM crossorigin><link rel=stylesheet href=/assets/css/styles.ae6ff4a3.css><script src=/assets/js/runtime~main.751b419d.js defer></script><script src=/assets/js/main.62ce6156.js defer></script><body class=navigation-with-keyboard><script>!function(){var t,e=function(){try{return new URLSearchParams(window.location.search).get("docusaurus-theme")}catch(t){}}()||function(){try{return window.localStorage.getItem("theme")}catch(t){}}();t=null!==e?e:"light",document.documentElement.setAttribute("data-theme",t)}(),function(){try{for(var[t,e]of new URLSearchParams(window.location.search).entries())if(t.startsWith("docusaurus-data-")){var a=t.replace("docusaurus-data-","data-");document.documentElement.setAttribute(a,e)}}catch(t){}}()</script><div id=__docusaurus><div role=region aria-label="Skip to main content"><a class=skipToContent_fXgn href=#__docusaurus_skipToContent_fallback>Skip to main content</a></div><nav aria-label=Main class="navbar navbar--fixed-top"><div class=navbar__inner><div class=navbar__items><button aria-label="Toggle navigation bar" aria-expanded=false class="navbar__toggle clean-btn" type=button>
<p>I've previously talked about crafting an <a href=/2016/02/guaranteed-money-maker>Investment Formula</a> that would guarantee making money if you could predict which direction the stock market was going to go. This is going to be the first in a series of posts trying to flesh out what an actual investment strategy based on this formula would look like.</p>
<p>But first, the formula doesn't take into account two very important things: <strong>leverage</strong>, and the <strong>number of days invested</strong>. That's why I want to set up what I'm going to call the <strong>Profitability Score</strong>.</p>
<p>The definition is going to be very simple:</p>
<ul>
<li><span class=katex><span class=katex-mathml><math><semantics><mrow><mi>p</mi></mrow><annotation encoding=application/x-tex>p</annotation></semantics></math></span><span class=katex-html aria-hidden=true><span class=base><span class=strut style=height:0.625em;vertical-align:-0.1944em></span><span class="mord mathnormal">p</span></span></span></span>: Profit made once you exit the investment</li>
<li><span class=katex><span class=katex-mathml><math><semantics><mrow><mi>i</mi></mrow><annotation encoding=application/x-tex>i</annotation></semantics></math></span><span class=katex-html aria-hidden=true><span class=base><span class=strut style=height:0.6595em></span><span class="mord mathnormal">i</span></span></span></span>: Initial investment into the asset</li>
<li><span class=katex><span class=katex-mathml><math><semantics><mrow><mi>m</mi></mrow><annotation encoding=application/x-tex>m</annotation></semantics></math></span><span class=katex-html aria-hidden=true><span class=base><span class=strut style=height:0.4306em></span><span class="mord mathnormal">m</span></span></span></span>: Maximum investment in the asset</li>
<li><span class=katex><span class=katex-mathml><math><semantics><mrow><mi>l</mi><mo>=</mo><mi>m</mi><mi mathvariant=normal>/</mi><mi>i</mi></mrow><annotation encoding=application/x-tex>l = m / i</annotation></semantics></math></span><span class=katex-html aria-hidden=true><span class=base><span class=strut style=height:0.6944em></span><span class="mord mathnormal" style=margin-right:0.01968em>l</span><span class=mspace style=margin-right:0.2778em></span><span class=mrel>=</span><span class=mspace style=margin-right:0.2778em></span></span><span class=base><span class=strut style=height:1em;vertical-align:-0.25em></span><span class="mord mathnormal">m</span><span class=mord>/</span><span class="mord mathnormal">i</span></span></span></span>: The maximum leverage of an investment, as the ratio of maximum invested to initial investment</li>
<li><span class=katex><span class=katex-mathml><math><semantics><mrow><mi>d</mi></mrow><annotation encoding=application/x-tex>d</annotation></semantics></math></span><span class=katex-html aria-hidden=true><span class=base><span class=strut style=height:0.6944em></span><span class="mord mathnormal">d</span></span></span></span>: The number of days it takes to turn a profit</li>
</ul>
<p><span class=katex><span class=katex-mathml><math><semantics><mrow><mi>s</mi><mo>=</mo><mfrac><mrow><mn>1000</mn><mi>p</mi></mrow><mrow><mi>i</mi><mo stretchy=false>(</mo><mi>l</mi><mo>+</mo><mi>d</mi><mo stretchy=false>)</mo></mrow></mfrac><mo>=</mo><mfrac><mrow><mn>1000</mn><mi>p</mi></mrow><mrow><mi>m</mi><mo>+</mo><mi>i</mi><mo>⋅</mo><mi>d</mi></mrow></mfrac></mrow><annotation encoding=application/x-tex>s = \frac{1000 p}{i(l + d)} = \frac{1000 p}{m + i\cdot d}</annotation></semantics></math></span><span class=katex-html aria-hidden=true><span class=base><span class=strut style=height:0.4306em></span><span class="mord mathnormal">s</span><span class=mspace style=margin-right:0.2778em></span><span class=mrel>=</span><span class=mspace style=margin-right:0.2778em></span></span><span class=base><span class=strut style=height:1.4172em;vertical-align:-0.52em></span><span class=mord><span class="mopen nulldelimiter"></span><span class=mfrac><span class="vlist-t vlist-t2"><span class=vlist-r><span class=vlist style=height:0.8972em><span style=top:-2.655em><span class=pstrut style=height:3em></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">i</span><span class="mopen mtight">(</span><span class="mord mathnormal mtight" style=margin-right:0.01968em>l</span><span class="mbin mtight">+</span><span class="mord mathnormal mtight">d</span><span class="mclose mtight">)</span></span></span></span><span style=top:-3.23em><span class=pstrut style=height:3em></span><span class=frac-line style=border-bottom-width:0.04em></span></span><span style=top:-3.4461em><span class=pstrut style=height:3em></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1000</span><span class="mord mathnormal mtight">p</span></span></span></span></span><span class=vlist-s>​</span></span><span class=vlist-r><span class=vlist style=height:0.52em><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span><span class=mspace style=margin-right:0.2778em></span><span class=mrel>=</span><span class=mspace style=margin-right:0.2778em></span></span><span class=base><span class=strut style=height:1.3005em;vertical-align:-0.4033em></span><span class=mord><span class="mopen nulldelimiter"></span><span class=mfrac><span class="vlist-t vlist-t2"><span class=vlist-r><span class=vlist style=height:0.8972em><span style=top:-2.655em><span class=pstrut style=height:3em></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mathnormal mtight">m</span><span class="mbin mtight">+</span><span class="mord mathnormal mtight">i</span><span class="mbin mtight">⋅</span><span class="mord mathnormal mtight">d</span></span></span></span><span style=top:-3.23em><span class=pstrut style=height:3em></span><span class=frac-line style=border-bottom-width:0.04em></span></span><span style=top:-3.4461em><span class=pstrut style=height:3em></span><span class="sizing reset-size6 size3 mtight"><span class="mord mtight"><span class="mord mtight">1000</span><span class="mord mathnormal mtight">p</span></span></span></span></span><span class=vlist-s>​</span></span><span class=vlist-r><span class=vlist style=height:0.4033em><span></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span></p>
<p>Crazy, right? The score is simply the (normalized) profit you made divided by the leverage plus days invested. The <span class=katex><span class=katex-mathml><math><semantics><mrow><mo>⋅</mo><mn>1000</mn></mrow><annotation encoding=application/x-tex>\cdot 1000</annotation></semantics></math></span><span class=katex-html aria-hidden=true><span class=base><span class=strut style=height:0.6444em></span><span class=mord>⋅</span><span class=mord>1000</span></span></span></span> is just to turn the number into something more reasonable - people don't like hearing something with a profitability score of .001 for example.</p>
<h2 class="anchor anchorWithStickyNavbar_LWe7" id=theoretical-justification>Theoretical Justification<a href=#theoretical-justification class=hash-link aria-label="Direct link to Theoretical Justification" title="Direct link to Theoretical Justification">​</a></h2>
<p>The formula itself is designed to be simple in principle: I like making a profit, and I want to penalize the leverage you incur and days you have to invest. Ideally, we want to have a stock that goes up all the time. However, the investment formula takes advantage of a different case: trying to profit from highly volatile assets. If we can make money when the investment only has one day up, let's do it!</p>
<p>Even so, there are two potential issues: First, stocks that trend upward will have a higher profitability score - both leverage and days invested will be 1. To protect against only investing in this trend, I can do things like taking <span class=katex><span class=katex-mathml><math><semantics><mrow><mi>log</mi><mo>⁡</mo><mo stretchy=false>(</mo><mi>d</mi><mo stretchy=false>)</mo></mrow><annotation encoding=application/x-tex>\log(d)</annotation></semantics></math></span><span class=katex-html aria-hidden=true><span class=base><span class=strut style=height:1em;vertical-align:-0.25em></span><span class=mop>lo<span style=margin-right:0.01389em>g</span></span><span class=mopen>(</span><span class="mord mathnormal">d</span><span class=mclose>)</span></span></span></span>. I don't want to start biasing the scoring function until I have a practical reason to do so, so right now I'll leave it standing.</p>
<p>The second issue is how to penalize leverage and days invested relative to each other. As it currently stands, a leverage of 6x with only 1 day invested is the same as leveraging 2x with 3 days invested. In the future, I'd again want to look at making the impact of days invested smaller - I can get over an extra 3 days in the market if it means that I don't have to incur a highly leveraged position.</p>
<p>So there could be things about the scoring function we change in the future, but I want to run some actual tests before we start worrying about things like that!</p>
<h2 class="anchor anchorWithStickyNavbar_LWe7" id=running-a-simulation>Running a simulation<a href=#running-a-simulation class=hash-link aria-label="Direct link to Running a simulation" title="Direct link to Running a simulation">​</a></h2>
<p>This won't be an incredibly rigorous backtest, I just want to see some results from the work so far. Let's set up the simulation code again, and start looking into some random stocks. <strong>If you've read the last blog post, you can skip over the code.</strong> The only difference is that it's been ported to python to make the data-wrangling easier. Julia doesn't yet support some of the multi-index things I'm trying to do.</p>
<div class="language-python codeBlockContainer_Ckt0 theme-code-block" style="--prism-background-color:hsl(230, 1%, 98%);--prism-color:hsl(230, 8%, 24%)"><div class=codeBlockContent_biex><pre tabindex=0 class="prism-code language-python codeBlock_bY9V thin-scrollbar" style="background-color:hsl(230, 1%, 98%);color:hsl(230, 8%, 24%)"><code class=codeBlockLines_e6Vv><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token keyword" style="color:hsl(301, 63%, 40%)">import</span><span class="token plain"> numpy </span><span class="token keyword" style="color:hsl(301, 63%, 40%)">as</span><span class="token plain"> np</span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain"></span><span class="token keyword" style="color:hsl(301, 63%, 40%)">import</span><span class="token plain"> pandas </span><span class="token keyword" style="color:hsl(301, 63%, 40%)">as</span><span class="token plain"> pd</span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain"></span><span class="token keyword" style="color:hsl(301, 63%, 40%)">import</span><span class="token plain"> matplotlib</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">pyplot </span><span class="token keyword" style="color:hsl(301, 63%, 40%)">as</span><span class="token plain"> plt</span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain"></span><span class="token keyword" style="color:hsl(301, 63%, 40%)">from</span><span class="token plain"> Quandl </span><span class="token keyword" style="color:hsl(301, 63%, 40%)">import</span><span class="token plain"> get </span><span class="token keyword" style="color:hsl(301, 63%, 40%)">as</span><span class="token plain"> qget</span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain"></span><span class="token operator" style="color:hsl(221, 87%, 60%)">%</span><span class="token plain">matplotlib inline</span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">api_key </span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token plain"> </span><span class="token string" style="color:hsl(119, 34%, 47%)">''</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain" style=display:inline-block></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">profitability </span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token plain"> </span><span class="token keyword" style="color:hsl(301, 63%, 40%)">lambda</span><span class="token plain"> p</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> i</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> m</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> d</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">:</span><span class="token plain"> </span><span class="token number" style="color:hsl(35, 99%, 36%)">1000</span><span class="token operator" style="color:hsl(221, 87%, 60%)">*</span><span class="token plain">p </span><span class="token operator" style="color:hsl(221, 87%, 60%)">/</span><span class="token plain"> </span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token plain">m </span><span class="token operator" style="color:hsl(221, 87%, 60%)">+</span><span class="token plain"> i</span><span class="token operator" style="color:hsl(221, 87%, 60%)">*</span><span class="token plain">d</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain" style=display:inline-block></span><br></span><span class
<h2 class="anchor anchorWithStickyNavbar_LWe7" id=and-now-the-interesting-part>And now the interesting part<a href=#and-now-the-interesting-part class=hash-link aria-label="Direct link to And now the interesting part" title="Direct link to And now the interesting part">​</a></h2>
<p>Let's start looking into the data! FANG stocks have been big over the past year, let's see how they look:</p>
<div class="language-python codeBlockContainer_Ckt0 theme-code-block" style="--prism-background-color:hsl(230, 1%, 98%);--prism-color:hsl(230, 8%, 24%)"><div class=codeBlockContent_biex><pre tabindex=0 class="prism-code language-python codeBlock_bY9V thin-scrollbar" style="background-color:hsl(230, 1%, 98%);color:hsl(230, 8%, 24%)"><code class=codeBlockLines_e6Vv><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">fang_df </span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token plain"> simulate_tickers</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">[</span><span class="token string" style="color:hsl(119, 34%, 47%)">"YAHOO/FB"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token string" style="color:hsl(119, 34%, 47%)">"YAHOO/AAPL"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token string" style="color:hsl(119, 34%, 47%)">"YAHOO/NFLX"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token string" style="color:hsl(119, 34%, 47%)">"YAHOO/GOOG"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">]</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><br></span></code></pre><div class=buttonGroup__atx><button type=button aria-label="Copy code to clipboard" title=Copy class=clean-btn><span class=copyButtonIcons_eSgA aria-hidden=true><svg viewBox="0 0 24 24" class=copyButtonIcon_y97N><path fill=currentColor d="M19,21H8V7H19M19,5H8A2,2 0 0,0 6,7V21A2,2 0 0,0 8,23H19A2,2 0 0,0 21,21V7A2,2 0 0,0 19,5M16,1H4A2,2 0 0,0 2,3V17H4V3H16V1Z"/></svg><svg viewBox="0 0 24 24" class=copyButtonSuccessIcon_LjdS><path fill=currentColor d=M21,7L9,19L3.5,13.5L4.91,12.09L9,16.17L19.59,5.59L21,7Z /></svg></span></button></div></div></div>
<div class="language-python codeBlockContainer_Ckt0 theme-code-block" style="--prism-background-color:hsl(230, 1%, 98%);--prism-color:hsl(230, 8%, 24%)"><div class=codeBlockContent_biex><pre tabindex=0 class="prism-code language-python codeBlock_bY9V thin-scrollbar" style="background-color:hsl(230, 1%, 98%);color:hsl(230, 8%, 24%)"><code class=codeBlockLines_e6Vv><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">fang_df</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">xs</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token string" style="color:hsl(119, 34%, 47%)">'days'</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> axis</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">1</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> level</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">1</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">hist</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">plt</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">gcf</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">set_size_inches</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token number" style="color:hsl(35, 99%, 36%)">18</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token number" style="color:hsl(35, 99%, 36%)">8</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">;</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">plt</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">gcf</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">suptitle</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token string" style="color:hsl(119, 34%, 47%)">"Distribution of Days Until Profitability"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> fontsize</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">18</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">;</span><br></span></code></pre><div class=buttonGroup__atx><button type=button aria-label="Copy code to clipboard" title=Copy class=clean-btn><span class=copyButtonIcons_eSgA aria-hidden=true><svg viewBox="0 0 24 24" class=copyButtonIcon_y97N><path fill=currentColor d="M19,21H8V7H19M19,5H8A2,2 0 0,0 6,7V21A2,2 0 0,0 8,23H19A2,2 0 0,0 21,21V7A2,2 0 0,0 19,5M16,1H4A2,2 0 0,0 2,3V17H4V3H16V1Z"/></svg><svg viewBox="0 0 24 24" class=copyButtonSuccessIcon_LjdS><path fill=currentColor d=M21,7L9,19L3.5,13.5
<p><img decoding=async loading=lazy alt=png src=/assets/images/_notebook_4_0-46068cab7ea025b2c7ee79ad91eaf317.png width=1048 height=520 class=img_ev3q></p>
<div class="language-python codeBlockContainer_Ckt0 theme-code-block" style="--prism-background-color:hsl(230, 1%, 98%);--prism-color:hsl(230, 8%, 24%)"><div class=codeBlockContent_biex><pre tabindex=0 class="prism-code language-python codeBlock_bY9V thin-scrollbar" style="background-color:hsl(230, 1%, 98%);color:hsl(230, 8%, 24%)"><code class=codeBlockLines_e6Vv><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">fang_df</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">xs</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token string" style="color:hsl(119, 34%, 47%)">'score'</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> axis</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">1</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> level</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">1</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">plot</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">plt</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">gcf</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">set_size_inches</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token number" style="color:hsl(35, 99%, 36%)">18</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token number" style="color:hsl(35, 99%, 36%)">6</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">plt</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">gcf</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">suptitle</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token string" style="color:hsl(119, 34%, 47%)">"Profitability score over time"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> fontsize</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">18</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">;</span><br></span></code></pre><div class=buttonGroup__atx><button type=button aria-label="Copy code to clipboard" title=Copy class=clean-btn><span class=copyButtonIcons_eSgA aria-hidden=true><svg viewBox="0 0 24 24" class=copyButtonIcon_y97N><path fill=currentColor d="M19,21H8V7H19M19,5H8A2,2 0 0,0 6,7V21A2,2 0 0,0 8,23H19A2,2 0 0,0 21,21V7A2,2 0 0,0 19,5M16,1H4A2,2 0 0,0 2,3V17H4V3H16V1Z"/></svg><svg viewBox="0 0 24 24" class=copyButtonSuccessIcon_LjdS><path fill=currentColor d=M21,7L9,19L3.5,13.5L4.91,12.09L9,16.17L19.59,5.59L21,7Z /></svg></span></button></div></div></div>
<p><img decoding=async loading=lazy alt=png src=/assets/images/_notebook_5_0-85416fdde3eb77aa133be1e7dab17d9f.png width=1041 height=388 class=img_ev3q></p>
<p>Let's think about these graphs. First, the histogram. What we like seeing is a lot of 1's - that means there were a lot of days that the stock went up and we didn't have to worry about actually implementing the strategy - we were able to close the trade at a profit.</p>
<p>Looking at the profitability score over time though is a bit more interesting. First off, stocks that are more volatile will tend to have a higher profitability score, no two ways about that. However, Netflix consistently outperformed on this metric. We know that 2015 was a good year for Netflix, so that's a (small) sign the strategy is performing as expected.</p>
<p>The final interesting note happens around the end of August 2015. Around this period, the markets were selling off in a big way due to issues in China (not unlike what's happening now). Even so, all of the FANG stocks saw an uptick in profitability around this time. This is another sign that the strategy being developed performs better during periods of volatility, rather than from riding markets up or down.</p>
<p>What about FANG vs. some cyclicals?</p>
<div class="language-python codeBlockContainer_Ckt0 theme-code-block" style="--prism-background-color:hsl(230, 1%, 98%);--prism-color:hsl(230, 8%, 24%)"><div class=codeBlockContent_biex><pre tabindex=0 class="prism-code language-python codeBlock_bY9V thin-scrollbar" style="background-color:hsl(230, 1%, 98%);color:hsl(230, 8%, 24%)"><code class=codeBlockLines_e6Vv><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">cyclic_df </span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token plain"> simulate_tickers</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">[</span><span class="token string" style="color:hsl(119, 34%, 47%)">"YAHOO/X"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token string" style="color:hsl(119, 34%, 47%)">"YAHOO/CAT"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token string" style="color:hsl(119, 34%, 47%)">"YAHOO/NFLX"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token string" style="color:hsl(119, 34%, 47%)">"YAHOO/GOOG"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">]</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><br></span></code></pre><div class=buttonGroup__atx><button type=button aria-label="Copy code to clipboard" title=Copy class=clean-btn><span class=copyButtonIcons_eSgA aria-hidden=true><svg viewBox="0 0 24 24" class=copyButtonIcon_y97N><path fill=currentColor d="M19,21H8V7H19M19,5H8A2,2 0 0,0 6,7V21A2,2 0 0,0 8,23H19A2,2 0 0,0 21,21V7A2,2 0 0,0 19,5M16,1H4A2,2 0 0,0 2,3V17H4V3H16V1Z"/></svg><svg viewBox="0 0 24 24" class=copyButtonSuccessIcon_LjdS><path fill=currentColor d=M21,7L9,19L3.5,13.5L4.91,12.09L9,16.17L19.59,5.59L21,7Z /></svg></span></button></div></div></div>
<div class="language-python codeBlockContainer_Ckt0 theme-code-block" style="--prism-background-color:hsl(230, 1%, 98%);--prism-color:hsl(230, 8%, 24%)"><div class=codeBlockContent_biex><pre tabindex=0 class="prism-code language-python codeBlock_bY9V thin-scrollbar" style="background-color:hsl(230, 1%, 98%);color:hsl(230, 8%, 24%)"><code class=codeBlockLines_e6Vv><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">cyclic_df</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">xs</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token string" style="color:hsl(119, 34%, 47%)">'days'</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> axis</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">1</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> level</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">1</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">hist</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">plt</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">gcf</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">set_size_inches</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token number" style="color:hsl(35, 99%, 36%)">18</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token number" style="color:hsl(35, 99%, 36%)">8</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">;</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">plt</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">gcf</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">suptitle</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token string" style="color:hsl(119, 34%, 47%)">"Distribution of Days Until Profitability"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> fontsize</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">18</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">;</span><br></span></code></pre><div class=buttonGroup__atx><button type=button aria-label="Copy code to clipboard" title=Copy class=clean-btn><span class=copyButtonIcons_eSgA aria-hidden=true><svg viewBox="0 0 24 24" class=copyButtonIcon_y97N><path fill=currentColor d="M19,21H8V7H19M19,5H8A2,2 0 0,0 6,7V21A2,2 0 0,0 8,23H19A2,2 0 0,0 21,21V7A2,2 0 0,0 19,5M16,1H4A2,2 0 0,0 2,3V17H4V3H16V1Z"/></svg><svg viewBox="0 0 24 24" class=copyButtonSuccessIcon_LjdS><path fill=currentColor d=M21,7L9,19L3.5,13
<p><img decoding=async loading=lazy alt=png src=/assets/images/_notebook_8_0-f511f25f81b5b7b1baeaef267dd1a2b4.png width=1048 height=520 class=img_ev3q></p>
<div class="language-python codeBlockContainer_Ckt0 theme-code-block" style="--prism-background-color:hsl(230, 1%, 98%);--prism-color:hsl(230, 8%, 24%)"><div class=codeBlockContent_biex><pre tabindex=0 class="prism-code language-python codeBlock_bY9V thin-scrollbar" style="background-color:hsl(230, 1%, 98%);color:hsl(230, 8%, 24%)"><code class=codeBlockLines_e6Vv><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">cyclic_df</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">xs</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token string" style="color:hsl(119, 34%, 47%)">'score'</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> axis</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">1</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> level</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">1</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">plot</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">plt</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">gcf</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">set_size_inches</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token number" style="color:hsl(35, 99%, 36%)">18</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token number" style="color:hsl(35, 99%, 36%)">6</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">plt</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">gcf</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">suptitle</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token string" style="color:hsl(119, 34%, 47%)">"Profitability score over time"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> fontsize</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">18</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">;</span><br></span></code></pre><div class=buttonGroup__atx><button type=button aria-label="Copy code to clipboard" title=Copy class=clean-btn><span class=copyButtonIcons_eSgA aria-hidden=true><svg viewBox="0 0 24 24" class=copyButtonIcon_y97N><path fill=currentColor d="M19,21H8V7H19M19,5H8A2,2 0 0,0 6,7V21A2,2 0 0,0 8,23H19A2,2 0 0,0 21,21V7A2,2 0 0,0 19,5M16,1H4A2,2 0 0,0 2,3V17H4V3H16V1Z"/></svg><svg viewBox="0 0 24 24" class=copyButtonSuccessIcon_LjdS><path fill=currentColor d=M21,7L9,19L3.5,13.5L4.91,12.09L9,16.17L19.59,5.59L21,7Z /></svg></span></button></div></div></div>
<p><img decoding=async loading=lazy alt=png src=/assets/images/_notebook_9_0-1bd353a1fa4f84f07d0964b59b00be1e.png width=1041 height=388 class=img_ev3q></p>
<p>Some more interesting results come from this as well. First off, US Steel (X) has a much smoother distribution of days until profitability - it doesn't have a huge number of values at 1 and then drop off. Intuitively, we're not terribly large fans of this, we want a stock to go up! However, on the profitability score it is the only serious contender to Netflix.</p>
<p>Second, we see the same trend around August - the algorithm performs well in volatile markets.</p>
<p>For a final test, let's try some biotech and ETFs!</p>
<div class="language-python codeBlockContainer_Ckt0 theme-code-block" style="--prism-background-color:hsl(230, 1%, 98%);--prism-color:hsl(230, 8%, 24%)"><div class=codeBlockContent_biex><pre tabindex=0 class="prism-code language-python codeBlock_bY9V thin-scrollbar" style="background-color:hsl(230, 1%, 98%);color:hsl(230, 8%, 24%)"><code class=codeBlockLines_e6Vv><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">biotech_df </span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token plain"> simulate_tickers</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">[</span><span class="token string" style="color:hsl(119, 34%, 47%)">'YAHOO/REGN'</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token string" style="color:hsl(119, 34%, 47%)">'YAHOO/CELG'</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token string" style="color:hsl(119, 34%, 47%)">'GOOG/NASDAQ_BIB'</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token string" style="color:hsl(119, 34%, 47%)">'GOOG/NASDAQ_IBB'</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">]</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><br></span></code></pre><div class=buttonGroup__atx><button type=button aria-label="Copy code to clipboard" title=Copy class=clean-btn><span class=copyButtonIcons_eSgA aria-hidden=true><svg viewBox="0 0 24 24" class=copyButtonIcon_y97N><path fill=currentColor d="M19,21H8V7H19M19,5H8A2,2 0 0,0 6,7V21A2,2 0 0,0 8,23H19A2,2 0 0,0 21,21V7A2,2 0 0,0 19,5M16,1H4A2,2 0 0,0 2,3V17H4V3H16V1Z"/></svg><svg viewBox="0 0 24 24" class=copyButtonSuccessIcon_LjdS><path fill=currentColor d=M21,7L9,19L3.5,13.5L4.91,12.09L9,16.17L19.59,5.59L21,7Z /></svg></span></button></div></div></div>
<div class="language-python codeBlockContainer_Ckt0 theme-code-block" style="--prism-background-color:hsl(230, 1%, 98%);--prism-color:hsl(230, 8%, 24%)"><div class=codeBlockContent_biex><pre tabindex=0 class="prism-code language-python codeBlock_bY9V thin-scrollbar" style="background-color:hsl(230, 1%, 98%);color:hsl(230, 8%, 24%)"><code class=codeBlockLines_e6Vv><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">biotech_df</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">xs</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token string" style="color:hsl(119, 34%, 47%)">'days'</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> axis</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">1</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> level</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">1</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">hist</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">plt</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">gcf</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">set_size_inches</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token number" style="color:hsl(35, 99%, 36%)">18</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token number" style="color:hsl(35, 99%, 36%)">8</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">;</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">plt</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">gcf</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">suptitle</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token string" style="color:hsl(119, 34%, 47%)">"Distribution of Days Until Profitability"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> fontsize</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">18</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">;</span><br></span></code></pre><div class=buttonGroup__atx><button type=button aria-label="Copy code to clipboard" title=Copy class=clean-btn><span class=copyButtonIcons_eSgA aria-hidden=true><svg viewBox="0 0 24 24" class=copyButtonIcon_y97N><path fill=currentColor d="M19,21H8V7H19M19,5H8A2,2 0 0,0 6,7V21A2,2 0 0,0 8,23H19A2,2 0 0,0 21,21V7A2,2 0 0,0 19,5M16,1H4A2,2 0 0,0 2,3V17H4V3H16V1Z"/></svg><svg viewBox="0 0 24 24" class=copyButtonSuccessIcon_LjdS><path fill=currentColor d=M21,7L9,19L3.5,1
<p><img decoding=async loading=lazy alt=png src=/assets/images/_notebook_12_0-78c0e39ab1b402672551d197e388d2ba.png width=1048 height=520 class=img_ev3q></p>
<div class="language-python codeBlockContainer_Ckt0 theme-code-block" style="--prism-background-color:hsl(230, 1%, 98%);--prism-color:hsl(230, 8%, 24%)"><div class=codeBlockContent_biex><pre tabindex=0 class="prism-code language-python codeBlock_bY9V thin-scrollbar" style="background-color:hsl(230, 1%, 98%);color:hsl(230, 8%, 24%)"><code class=codeBlockLines_e6Vv><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">biotech_df</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">xs</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token string" style="color:hsl(119, 34%, 47%)">'score'</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> axis</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">1</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> level</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">1</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">plot</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">plt</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">gcf</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">set_size_inches</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token number" style="color:hsl(35, 99%, 36%)">18</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> </span><span class="token number" style="color:hsl(35, 99%, 36%)">6</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token plain"></span><br></span><span class=token-line style="color:hsl(230, 8%, 24%)"><span class="token plain">plt</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">gcf</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">.</span><span class="token plain">suptitle</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">(</span><span class="token string" style="color:hsl(119, 34%, 47%)">"Profitability score over time"</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">,</span><span class="token plain"> fontsize</span><span class="token operator" style="color:hsl(221, 87%, 60%)">=</span><span class="token number" style="color:hsl(35, 99%, 36%)">18</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">)</span><span class="token punctuation" style="color:hsl(119, 34%, 47%)">;</span><br></span></code></pre><div class=buttonGroup__atx><button type=button aria-label="Copy code to clipboard" title=Copy class=clean-btn><span class=copyButtonIcons_eSgA aria-hidden=true><svg viewBox="0 0 24 24" class=copyButtonIcon_y97N><path fill=currentColor d="M19,21H8V7H19M19,5H8A2,2 0 0,0 6,7V21A2,2 0 0,0 8,23H19A2,2 0 0,0 21,21V7A2,2 0 0,0 19,5M16,1H4A2,2 0 0,0 2,3V17H4V3H16V1Z"/></svg><svg viewBox="0 0 24 24" class=copyButtonSuccessIcon_LjdS><path fill=currentColor d=M21,7L9,19L3.5,13.5L4.91,12.09L9,16.17L19.59,5.59L21,7Z /></svg></span></button></div></div></div>
<p><img decoding=async loading=lazy alt=png src=/assets/images/_notebook_13_0-d109b38c5db52ca12be209a2a268c6eb.png width=1041 height=388 class=img_ev3q></p>
<p>In this example, we don't see a whole lot of interesting things: the scores are all fairly close together with notable exceptions in late August, and mid-October.</p>
<p>What is interesting is that during the volatile period, the ETF's performed significantly better than the stocks did in terms of profitability. The leveraged ETF (BIB) performed far above anyone else, and it appears that indeed, it is most profitable during volatile periods. Even so, it was far more likely to take multiple days to give a return. Its count of 1-day investments trails the other ETF and both stocks by a decent margin.</p>
<p>And consider me an OCD freak, but I just really like Celgene's distribution - it looks nice and smooth.</p>
<h2 class="anchor anchorWithStickyNavbar_LWe7" id=summary-and-plans-for-the-next-post>Summary and plans for the next post<a href=#summary-and-plans-for-the-next-post class=hash-link aria-label="Direct link to Summary and plans for the next post" title="Direct link to Summary and plans for the next post">​</a></h2>
<p>So far I'm really enjoying playing with this strategy - there's a lot of depth here to understand, though the preliminary results seem to indicate that it profits mostly from taking the other side of a volatile trade. I'd be interested to run results later on data from January - It's been a particularly volatile start to the year so it would be neat to see whether this strategy would work then.</p>
<p>For the next post, I want to start playing with some of the parameters: How do the bias and expected close influence the process? The values have been fairly conservative so far, it will be interesting to see how the simulations respond afterward.</div></article><nav class="pagination-nav docusaurus-mt-lg" aria-label="Blog post page navigation"><a class="pagination-nav__link pagination-nav__link--prev" href=/2016/02/guaranteed-money-maker><div class=pagination-nav__sublabel>Older post</div><div class=pagination-nav__label>Guaranteed money maker</div></a><a class="pagination-nav__link pagination-nav__link--next" href=/2016/03/predicting-santander-customer-happiness><div class=pagination-nav__sublabel>Newer post</div><div class=pagination-nav__label>Predicting Santander customer happiness</div></a></nav></main><div class="col col--2"><div class="tableOfContents_bqdL thin-scrollbar"><ul class="table-of-contents table-of-contents__left-border"><li><a href=#theoretical-justification class="table-of-contents__link toc-highlight">Theoretical Justification</a><li><a href=#running-a-simulation class="table-of-contents__link toc-highlight">Running a simulation</a><li><a href=#and-now-the-interesting-part class="table-of-contents__link toc-highlight">And now the interesting part</a><li><a href=#summary-and-plans-for-the-next-post class="table-of-contents__link toc-highlight">Summary and plans for the next post</a></ul></div></div></div></div></div><footer class=footer><div class="container container-fluid"><div class="footer__bottom text--center"><div class=footer__copyright>Copyright © 2024 Bradlee Speice</div></div></div></footer></div>
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