MinimumVariancePortfolioOptimizer Max Holding Constraint

Hi Jec,

Well. You would need an indicator for variance. There's one in QC: Variance.

So you need one of those per asset. You update it with Close, most likely, well, if you want variance on price.

And then, every time you are rebalancing, you sort assets from lowest current variance to highest and you take the first M ones (like 3 in your example) which you keep and you liquidate the N-M others (7 in your example).

MinimumVariancePortfolioOptimizer does something else. It minimized your overall portfolio variance, not per asset. I am not sure right off the bat I would start with that class as a starting point…

This is all high level but hope it still helps. Maybe someone else already implemented it and will share. Or you can start some code and we help along. Or I may end up coding it, I've done it in the past, but right now, I can't.

Fred

Hi Fred,

Thank you for your suggestions. You spurred an idea I recall from a statistics course I took in college. When dealing with a model with many variables, we removed parameters one by one using a given metric. In my class it was multi-colinearility, but in this case I could start with my full basket and remove the security with the lowest weight and repeat the optimization until I am at the desired portfolio size.

Thanks,

Jec

I now better see what you wanted to do 😊. You wanted the optimal selection of say 3 assets out of 10. I'm not 100% sure (it is not trivial) but yes, I believe the optimal selection could have that “compositional property”, i.e., you have assets 1, 2, 3 and 4, you remove the lowest weight one, say 3, then you repeat with 1, 2 and 4, you remove the lowest again, say 2, you end up with 1 and 4. 1 and 4 needs to be better than, say, 1 and 3 (like if you had removed 2 instead of 3 the first time and when you optimize with 1, 3 and 4, you end up with removing 4 the second time and end up with a better result overall)………………………………………….

Fred