Example6_3.py

"""
# Calculating the Optimal Allocation Using Kelly formula
"""
import numpy as np
import pandas as pd
from numpy.linalg import inv

df1 = pd.read_excel("miscFiles/OIH.xls")
df2 = pd.read_excel("miscFiles/RKH.xls")
df = pd.merge(df1, df2, on="Date", suffixes=("_OIH", "_RKH"))
df.set_index("Date", inplace=True)
df3 = pd.read_excel("miscFiles/RTH.xls")
df = pd.merge(df, df3, on="Date")
df.rename(columns={"Adj Close": "Adj Close_RTH"}, inplace=True)
df.set_index("Date", inplace=True)
df.sort_index(inplace=True)
dailyret = df.loc[:, ("Adj Close_OIH", "Adj Close_RKH", "Adj Close_RTH")].pct_change()
dailyret.rename(
    columns={"Adj Close_OIH": "OIH", "Adj Close_RKH": "RKH", "Adj Close_RTH": "RTH"},
    inplace=True,
)
excessRet = dailyret - 0.04 / 252

M = 252 * excessRet.mean()
print(M)

C = 252 * excessRet.cov()
print(C)

F = np.dot(inv(C), M)
print(F)

g = 0.04 + np.dot(F.T, np.dot(C, F)) / 2
print(g)

S = np.sqrt(np.dot(F.T, np.dot(C, F)))
print(S)