Risk Portfolio

Think of Soteria as your personal quant analyst. You speak in plain English; it quietly runs the right RiskFolio tool under the hood. Use this cheat‑sheet whenever you wonder “What should I ask, and which modes are available?”

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Quick Start

“Optimize a minimum‑variance mix of AAPL, MSFT, NVDA; cap any stock at 20 %; plot the growth of $1.” Soteria replies with weights, a pie chart, and a line chart asking you first if you want to place the trades. That’s the magic: one sentence, multiple tools. Read on for the full menu.

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Download Historical Returns

Function: Retrieves historical price data and converts to percentage or logarithmic returns for analysis. Key phrases: log returns, adjusted close, explicit date range. Example prompt: “Fetch log returns for AAPL & MSFT from 2020‑01‑01.”

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Plot Cumulative Growth

Function: Calculates and visualizes the compounded growth of portfolio value over time. Key phrases: title. Example prompt: “Plot cumulative growth; title Tech vs S&P.”

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Show Allocation Pie

Function: Creates a visual pie chart representation of portfolio weight distributions. Key phrases: title. Example prompt: “Pie‑chart my optimized weights.”

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Classic Mean‑Variance Optimization

Function: Performs traditional Markowitz style portfolio optimization (minimize variance $w^T\Sigma w$ or maximize Sharpe) with various risk measures and objectives. Key phrases: Classic / FM; risk measure (MV, CVaR, MDD, …); objective (Sharpe, MinRisk, Utility l=3); allow shorts. Example prompt: “Maximize Sharpe for these 10 stocks allow shorts 20 %; risk = CVaR 95 %.”

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Optimization with Weight Limits

Function: Applies portfolio optimization while respecting user defined constraints on individual assets or asset classes. Key phrases: “no stock above 12 %,” “Bonds ≥ 10 %.” Example prompt: “Min‑variance; cap any stock at 15 %; Bonds ≥ 10 %.”

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Hierarchical Clustering Optimization

Function: Creates portfolios using hierarchical risk parity methods that cluster similar assets before allocation. Key phrases: model HRP, HERC, HERC2, NCO; dependency (pearson, distance); optional risk target. Example prompt: “Create an HRP portfolio of these 30 ETFs; minimize variance.”

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Estimate Expected Returns

Function: Generates forward looking return estimates using various statistical (historical or shrinkage estimators) approaches.

Method keyword	Idea (math‑lite)	When useful
hist	Simple arithmetic mean	Stable markets, long history
EWMA λ	Weighted mean (1‑λ)Σλ^t r_t	Emphasize recent data or regime shifts
James‑Stein	Shrink toward grand mean	Many assets, small sample
Bayes‑Stein	Shrink toward prior belief	Expect modest excess returns
BOP	Fully Bayesian posterior	Need probabilistic estimates

Key phrases: any method keyword above (e.g. EWMA λ 0.94). Example prompt: “Estimate mean returns with EWMA λ 0.94.”

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Estimate Covariance Matrix

Function: Computes asset correlation and volatility relationships using robust statistical estimators.

Method keyword	Idea	When useful
hist	Sample covariance	Plenty of observations per asset
Ledoit	Shrink toward identity	Many assets, noisy sample
EWMA	Decay‑weighted covariance	Volatility clustering, recent shocks
semi	Downside semi‑covariance	Focus on downside risk only
kernel	Non‑parametric smoothing	Heavy tails or nonlinear dependence

Key phrases: any keyword above + detone market (removes first PC). Example prompt: “Use Ledoit covariance and detone market.”

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Compute Cokurtosis Matrix

Function: Analyzes higher order statistical moments to capture tail risk and extreme event dependencies (estimates fourth order co‑moments $K_{ijkl}=E[(r_i-\mu_i)…(r_l-\mu_l)]$ to capture tail dependence). Key phrases: alpha 0.05, method (hist, exp). Example prompt: “Cokurtosis alpha 0.05 for FAANG.”

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Risk‑Adjusted Sharpe Ratio

Function: Calculates risk adjusted returns using various risk measures beyond standard deviation ($\text{SR}=\frac{\mu_p-r_f}{\rho(p)}$ where $\rho$ may be variance, CVaR, MDD, etc). Key phrases: risk keyword (CVaR, MDD, MAD, …). Example prompt: “Sharpe using CVaR at 95 % for these weights.”

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Single Risk Metric

Function: Computes individual risk statistics for detailed portfolio analysis and comparison.

Metric	Description
MAD	Mean absolute deviation
MDD_Rel	Relative max drawdown
SemiDeviation	Downside deviation
Kurtosis	4th‑moment fat‑tailness

Key phrases: any metric keyword above. Example prompt: “Compute MDD_Rel for BTC daily returns.”

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Build Portfolio Return Series

Function: Constructs time series of portfolio performance with flexible rebalancing options. Key phrases: rebalance true (monthly) or rebalance false (buy‑and‑hold). Example prompt: “Portfolio returns with quarterly rebalancing.”

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Export CSV Report

Function: Generates a CSV containing dates, asset returns, portfolio return, variance, CVaR, Sharpe. Key phrases: (no extra keywords). Example prompt: “Export a CSV performance report.”

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Quick Cheat Sheet

Capability	Key phrases	Prompt snippet
Download returns	log returns, adjusted, dates	“log returns for AAPL 2020‑01‑01”
Plot growth	title	“plot growth title: Tech vs S&P”
Pie chart	title	“pie‑chart weights”
Classic optimize	risk (CVaR 95 %), Sharpe, allow shorts	“Max‑Sharpe CVaR 95 % allow shorts”
Caps optimize	caps/floors text	“cap stock ≤ 12 %”
HRP/HERC	HRP, minimize variance	“HRP minimize variance”
Mean vector	EWMA λ, James‑Stein	“mean James‑Stein”
Covariance	Ledoit, detone	“Ledoit covariance detone”
Cokurtosis	alpha 0.05	“cokurtosis alpha 0.05”
Sharpe ratio	risk keyword	“Sharpe CVaR”
Risk metric	metric keyword	“MDD_Rel BTC”
Portfolio series	rebalance true/false	“returns quarterly rebalance”
Export CSV	-	“export CSV”

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