Violins of Volatility

March 29, 2011
By

(This article was first published on Revolutions, and kindly contributed to R-bloggers)

A violin plot is a combination box plot and a kernel density plot: it starts with a box plot, and adds a rotated kernel density plot to each side of the box plot. You can create violin plots with the vioplot function (from the vioplot package) package in R

When looking at the volatility of financial instruments, the financial blogger "Milk Trader" suggests Volatility Violins can be helpful. Using the getSymbols function to download VIX and SPX data from Yahoo, he provides code to compare the volatility of the two indices. As suggested by a commenter, I adapted the code to scale the SPX data to match the annualized VIX:

SPX <- getSymbols("^GSPC", auto.assign=FALSE)[,4]
SPX <- Delt(SPX, k=30)
SPX <- na.locf(SPX, na.rm=TRUE)
SPX <- abs(SPX)*sqrt(365/30)

Created by Pretty R at inside-R.org

and the corresponding volatility violins are below:

SPX-VIX-violins
 
Follow the link below for the code to create charts like these for other symbols.

Milk Trader: Volatility Violins

 

 

To leave a comment for the author, please follow the link and comment on his blog: Revolutions.

R-bloggers.com offers daily e-mail updates about R news and tutorials on topics such as: visualization (ggplot2, Boxplots, maps, animation), programming (RStudio, Sweave, LaTeX, SQL, Eclipse, git, hadoop, Web Scraping) statistics (regression, PCA, time series, trading) and more...



If you got this far, why not subscribe for updates from the site? Choose your flavor: e-mail, twitter, RSS, or facebook...

Tags: ,

Comments are closed.