Risk-Managed Industry Momentum

1from AlgorithmImports import *
2class RiskManagedIndustryMomentum(QCAlgorithm):
3def Initialize(self):
4self.SetStartDate(2010, 1, 1)
5self.SetCash(100000)
6self.symbols = ["XLY", # Consumer Discretionary Select Sector SPDR Fund
7                "PBS", # Invesco Dynamic Media ETF
8                "PEJ", # Invesco Dynamic Leisure and Entertainment ETF
9                "PMR", # Invesco Dynamic Retail ETF
10                
11                "XLP", # Consumer Staples Select Sector SPDR Fund
12                "PBJ", # Invesco Dynamic Food & Beverage ETF
13                
14                "XLE", # Energy Select Sector SPDR Fund
15                "PBW", # Invesco WilderHill Clean Energy ETF
16                "PXE", # Invesco Dynamic Energy Exploration & Production ETF
17                "NLR", # VanEck Vectors Uranium+Nuclear Energy ETF
18                "AMJ", # JPMorgan Alerian MLP Index ETN
19                
20                "XLF", # Financial Select Sector SPDR Fund
21                "KBE", # SPDR S&P Bank ETF
22                "KIE", # SPDR S&P Insurance ETF
23                "KRE", # SPDR S&P Regional Banking ETF
24                "PSP", # Invesco Global Listed Private Equity ETF
25                
26                "XLV", # Health Care Select Sector SPDR Fund
27                "IBB", # iShares Nasdaq Biotechnology ETF
28                "IHF", # iShares U.S. Healthcare Providers ETF
29                "IHE", # iShares U.S. Pharmaceuticals ETF
30                
31                "XLI", # Industrial Select Sector SPDR Fund
32                "ITA", # iShares U.S. Aerospace & Defense ETF
33                "IYT", # iShares Transportation Average ETF
34                "PHI", # Invesco Water Resources ETF
35                
36                "XLB", # Materials Select Sector SPDR ETF
37                "MOO", # VanEck Vectors Agribusiness ETF
38                "GDX", # VanEck Vectors Gold Miners ETF
39                "XHB", # SPDR S&P Homebuilders ETF
40                "IGE", # iShares North American Natural Resources ETF
41                
42                "XLK", # Technology Select Sector SPDR Fund
43                "FDN", # First Trust Dow Jones Internet Index
44                "SOXX", # iShares PHLX Semiconductor ETF
45                "IGV", # iShares Expanded Tech-Software Sector ET
46                "IYZ", # iShares U.S. Telecommunications ETF
47                
48                "XLU", # Utilities Select Sector SPDR Fund
49                "IGF", # iShares Global Infrastructure ETF
50                ]
51self.period = 21
52self.SetWarmUp(self.period)
53self.data = {}
54
55for symbol in self.symbols:
56    data = self.AddEquity(symbol, Resolution.Daily)
57    data.SetLeverage(10)
58    
59    self.data[symbol] = RollingWindow[float](self.period)
60    
61self.Schedule.On(self.DateRules.MonthStart(self.symbols[0]), self.TimeRules.AfterMarketOpen(self.symbols[0]), self.Rebalance)
62def OnData(self, data):
63for symbol in self.data:
64    if symbol in data and data[symbol]:
65        price = data[symbol].Value
66        self.data[symbol].Add(price)
67            
68def Rebalance(self):
69if self.IsWarmingUp: return
70
71# Return sorting
72return_volatility = {}
73for symbol in self.symbols:
74    if self.data[symbol].IsReady:
75        prices = np.array([x for x in self.data[symbol]])
76        ret = prices[0] / prices[-1] - 1
77        
78        daily_returns = prices[:-1] / prices[1:] - 1
79        vol = np.std(daily_returns) * np.sqrt(252)
80        return_volatility[symbol] = (ret, vol)
81sorted_by_return = sorted(return_volatility.items(), key = lambda x: x[1][0], reverse = True)
82sixth = int(len(sorted_by_return) / 6)
83long = [x for x in sorted_by_return[:sixth]]
84short = [x for x in sorted_by_return[-sixth:]]
85# Volatility weighting
86total_vol_long = sum([1/x[1][1] for x in long])
87weight = {}
88for symbol, ret_vol in long:
89    vol = ret_vol[1]
90    if vol != 0:
91        weight[symbol] = (1.0 / vol) / total_vol_long
92    else: 
93        weight[symbol] = 0
94total_vol_short = sum([1/x[1][1] for x in short])
95for symbol, ret_vol in short:
96    vol = ret_vol[1]
97    if vol != 0:
98        weight[symbol] = -(1.0 / vol) / total_vol_short
99    else: 
100        weight[symbol] = 0
101
102# Trade execution.
103invested = [x.Key.Value for x in self.Portfolio if x.Value.Invested]
104for symbol in invested:
105    if symbol not in weight:
106        self.Liquidate(symbol)
107
108for symbol, w in weight.items():
109    self.SetHoldings(symbol, w)