Alpha

Modified on 2020/07/19 14:32 by Eugene — Categorized as: Community Indicators, TASCIndicators

Alpha (TASCIndicators): Indicator Documentation

Syntax

public Alpha(DataSeries ds, int sdper, int lrper, string description)
public static Alpha Series(DataSeries ds, int sdper, int lrper)
public static double Value(int bar, DataSeries ds, int sdper, int lrper)

Parameter Description

ds	Source Series
sdper	Number of bars used when calculating the standard deviation of the price changes
lrper	Number of bars used for the prediction (linear regression) of tomorrow's price

Description

Based on an article by Rick Martinelli, published in June 2006-issue of Stocks and Commodities Magazine. The Alpha indicator is a measure of how likely tomorrow's price will be away from normal distributed prices. It is calculated as follows:

A forecast for the next day's price is made based on the last n bars based on linear prediction model (mx+b) The price-difference between the forecasted price and the last Closing price is divided by the standard deviation of the last x bars.

The higher the alpha-value the farer away is the prediction from the expected one according to the standard deviation. The value can be used to generate buy and sell signals if the value crosses over a certain threshold. Please read the article for more details.

Example

This example uses 7 bars to calculate the stddev and 3 bars to predict tomorrow's price:

using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;
using TASCIndicators;


namespace WealthLab.Strategies
{
	public class MyStrategy : WealthScript
	{
		protected override void Execute()
		{			
			DataSeries alpha = Alpha.Series(Close, 7, 3);
			ChartPane ap = CreatePane(40, true, true);
			PlotSeries(ap, alpha, Color.DarkGreen, LineStyle.Solid, 2);			
		}
	}
}

Alpha (Community.Indicators): Indicator Documentation

Syntax

public Alpha (Bars bars, Bars index, int period)

Parameter Description

bars	Primary Bars object
index	The Bars object for your index symbol
period	Lookback period

Description

According to definition at Investopedia, alpha is a measure of performance on a risk-adjusted basis.

Here we are using ^GSPC symbol of the S&P500 Index, suitable for Yahoo! data.

Example

using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;
using Community.Indicators;

namespace WealthLab.Strategies
{
	public class MyStrategy : WealthScript
	{
		protected override void Execute()
		{
			Alpha alpha = Alpha.Series( Bars, GetExternalSymbol("^GSPC",true),200);  // Yahoo symbol
			
			Beta beta = Beta.Series( Bars, GetExternalSymbol("^GSPC",true),200);  // Yahoo symbol
						
			ChartPane betatest = CreatePane( 30, true, true );
			ChartPane alphaversion = CreatePane( 30, true, true );
			PlotSeries( betatest, beta, Color.DarkMagenta, LineStyle.Solid, 2 );
			PlotSeries( alphaversion, alpha, Color.DarkBlue, LineStyle.Solid, 2 );
		}
	}
}