scatter chart of returns vs risk for comparing multiple instruments

A wrapper to create a scatter chart of annualized returns versus annualized risk (standard deviation) for comparing manager performance. Also puts a box plot into the margins to help identify the relative performance quartile.

chart.RiskReturnScatter(R, Rf = 0, main = "Annualized Return and Risk",
  add.names = TRUE, xlab = "Annualized Risk", ylab = "Annualized Return",
  method = "calc", geometric = TRUE, scale = NA, add.sharpe = c(1, 2,
  3), add.boxplots = FALSE, colorset = 1, symbolset = 1,
  element.color = "darkgray", legend.loc = NULL, xlim = NULL,
  ylim = NULL, cex.legend = 1, cex.axis = 0.8, cex.main = 1,
  cex.lab = 1, ...)

Arguments

R

an xts, vector, matrix, data frame, timeSeries or zoo object of asset returns
Rf

risk free rate, in same period as your returns
main

set the chart title, same as in plot
add.names

plots the row name with the data point. default TRUE. Can be removed by setting it to NULL
xlab

set the x-axis label, as in plot
ylab

set the y-axis label, as in plot
method

if set as "calc", then the function will calculate values from the set of returns passed in. If method is set to "nocalc" then we assume that R is a column of return and a column of risk (e.g., annualized returns, annualized risk), in that order. Other method cases may be set for different risk/return calculations.
geometric

utilize geometric chaining (TRUE) or simple/arithmetic chaining (FALSE) to aggregate returns, default TRUE
scale

number of periods in a year (daily scale = 252, monthly scale = 12, quarterly scale = 4)
add.sharpe

this draws a Sharpe ratio line that indicates Sharpe ratio levels of c(1,2,3). Lines are drawn with a y-intercept of the risk free rate and the slope of the appropriate Sharpe ratio level. Lines should be removed where not appropriate (e.g., sharpe.ratio = NULL).
add.boxplots

TRUE/FALSE adds a boxplot summary of the data on the axis
colorset

color palette to use, set by default to rational choices
symbolset

from pch in plot, submit a set of symbols to be used in the same order as the data sets submitted
element.color

provides the color for drawing chart elements, such as the box lines, axis lines, etc. Default is "darkgray"
legend.loc

places a legend into one of nine locations on the chart: bottomright, bottom, bottomleft, left, topleft, top, topright, right, or center.
xlim

set the x-axis limit, same as in plot
ylim

set the y-axis limit, same as in plot
cex.legend

The magnification to be used for sizing the legend relative to the current setting of 'cex'.
cex.axis

The magnification to be used for axis annotation relative to the current setting of 'cex', same as in plot.
cex.main

The magnification to be used for sizing the title relative to the current setting of 'cex'.
cex.lab

The magnification to be used for x and y labels relative to the current setting of 'cex'.
…

any other passthru parameters to plot

Note

Code inspired by a chart on: http://zoonek2.free.fr/UNIX/48_R/03.html

Examples


data(edhec)
chart.RiskReturnScatter(edhec, Rf = .04/12)
chart.RiskReturnScatter(edhec, Rf = .04/12, add.boxplots = TRUE)