knitr Performance Summary Attempt 2

Timely Portfolio April 18, 2012

This time we will try to incorporate some LYX brilliance to help us format the end result. Unfortunately, this process (most likely due to my ignorance) was not nearly as seamless as the rst experiments with knitr. I eventually went back to old-school manual coding in RStudio.

Performance Overview
We all know that performance reports generally blend both text tables and graphical charts to communicate. In this example, we will use two of the most popular Vanguard funds (vbmfx and vnx) as the subjects for our performance evaluation.

Annual Returns of VFINX and VBMFX

2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q

0.10

0.08

VBMFX VFINX

q q

Density

0.06

0.04

0.02

0.00

q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q

20

20

50

50

Return
2000 11.40 -9.10 2001 8.40 -12.00 2002 8.40 -22.20 2003 4.00 28.50 2004 4.30 10.70 2005 2.40 4.80 2006 4.30 15.60 2007 7.00 5.40 2008 5.10 -37.00 2009 6.00 26.50

Return
2010 6.30 14.90 2011 7.60 2.00 2012 1.00 11.20

VBMFX VFINX

knitr performance summary attempt 2

Risk and Return

Although the summary and distribution of annual returns is a good rst step, any real due diligence will require much more than just return. Lets do a very basic plot of risk and return. Of course, there are much more sophisticated methods, which we will explore in future versions.

Risk and Return Statistics

Variance UCL Mean (0.95) Stdev SE Mean Quartile 3 Quartile 1 Minimum Median Maximum LCL Mean (0.95) Geometric Mean Arithmetic Mean 0.15 0.10 0.05 0.00 0.05 0.10

Value

Diversication
In todays markets with almost universally high positive correlations, diversication is much more difcult. However, most performance reports should include some analysis of both correlation and diversication.

knitr performance summary attempt 2

Correlation Analysis
0.15 0.05 0.05

Density

0.097

0.15

q q q q q q q q q q q qq q qq q q q q q q q q q q qq q qq q q q q q q q qqq q q q q q q q q q q qq q q q q q q q qq q qq q qq q q q q q q qq q q q q q q q q q q q qq q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q qq q q q q qq q q q qq q q q q q q q q q q q q q q q q qqq qq q q q q q q q q q qq q q q q q q qq q q qq q q qq q qq qq q q q qq q q q qq q q q q q q q qq q q q q q q q q q q

0.00

VFINX

q q

0.02

0.00

0.02

Density

0.04 x

VBMFX and VFINX Rolling 12 Month Correlation

1.0

Value

1.0

0.5

0.0

0.5

May 91 Jan 94

Jan 97

Jan 00

Jan 03

Jan 06

Jan 09

Jan 12

Correlation

0.02

0.02

VBMFX

knitr performance summary attempt 2

Efficient Frontier with VBMFX and VFINX

q q q

0.0060 0.0065 0.0070 0.0075

0.01

0.02

0.03

0.04

MV | solveRquadprog

q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q q