Scribd
Upload
6 views4 pages

Hedge Fund Secret: How Detecting Market Irregularities: Anomaly

Uploaded by

tonny toninho
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
6 views4 pages

Hedge Fund Secret: How Detecting Market Irregularities: Anomaly

Uploaded by

tonny toninho
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

# abdallah abdelkarim

# paris le 17 juillet 2024

Hedge fund Secret : How Detecting Market Irregularities: Anomaly


Identifying market irregularities is crucial for making correct decisions. Anomalies in time-series data can indicate significant events, such as market
crashes or booms, which can have a profound impact on investment strategies. This tutorial will guide you through the process of detecting anomalies in
time-series data using Python, with a focus on financial data. We will leverage the power of object-oriented programming (OOP) to create a comprehensive
and reusable solution.

Introduction
Anomaly detection in time-series data is a critical task in various domains, including finance, healthcare and manufacturing. In the
financial sector, detecting anomalies can help identify unusual market behavior, such as sudden price spikes or drops, which may
indicate potential opportunities or risks. This tutorial will focus on using Python to detect anomalies in financial time-series data,
specifically stock prices. We will use the yfinance library to download real financial data and implement an anomaly detection system
using various techniques. By the end of this tutorial, you will have a solid understanding of how to detect anomalies in time-series data
and how to apply these techniques to real-world financial data.

Setting Up the Environment


First, let’s install the necessary libraries. We will use yfinance to download financial data, numpy for numerical operations, pandas for
data manipulation, matplotlib and mplfinance for plotting and scikit-learn for machine learning algorithms.

pip install yfinance numpy pandas matplotlib mplfinance scikit-learn plotly

import yfinance as yf
import numpy as np
import pandas as pd
import matplotlib.pyplot as plt
import mplfinance as mpf
from sklearn.ensemble import IsolationForest
import plotly.graph_objects as go

/Users/abdelkarimabdallah/anaconda3/lib/python3.11/site-packages/yfinance/base.py:48: FutureWarning: The defaul


t dtype for empty Series will be 'object' instead of 'float64' in a future version. Specify a dtype explicitly
to silence this warning.
_empty_series = pd.Series()

Downloading Financial Data


We will download historical stock price data for a diverse set of securities using the yfinance library. For this tutorial, let's choose some
less common stocks: NVDA (NVIDIA), NFLX (Netflix) and TSLA (Tesla). We will download data from January 1, 2020, to Juillet 16, 2024.

tickers = ['NVDA', 'NFLX', 'TSLA']


start_date = '2020-01-01'
end_date = '2024-07-17'

data = {}
for ticker in tickers:
ticker_data = yf.Ticker(ticker)
df = ticker_data.history(start=start_date, end=end_date)
df['Ticker'] = ticker
data[ticker] = df

Data Preprocessing
Before we dive into anomaly detection, let’s preprocess the data. We will focus on the closing prices and resample the data to a weekly
frequency to smooth out daily fluctuations.

def preprocess_data(data):
processed_data = {}
for ticker, df in data.items():
df = df['Close'].resample('W').mean()
processed_data[ticker] = df
return processed_data

processed_data = preprocess_data(data)
Visualizing the Data
Let’s visualize the closing prices of the selected stocks to get an initial understanding of the data.

def plot_data(processed_data):
plt.figure(figsize=(14, 7))
for ticker, df in processed_data.items():
plt.plot(df, label=ticker)
plt.title('Weekly Closing Prices')
plt.xlabel('Date')
plt.ylabel('Price')
plt.legend()

plot_data(processed_data)

Anomaly Detection Using Isolation Forest


Isolation Forest is a popular anomaly detection algorithm that works well with time-series data. It isolates observations by randomly
selecting a feature and then randomly selecting a split value between the maximum and minimum values of the selected feature.

Implementing Isolation Forest


We will create a class AnomalyDetector that uses Isolation Forest to detect anomalies in the time-series data.

class AnomalyDetector:
def __init__(self, contamination=0.05):
self.contamination = contamination
self.model = IsolationForest(contamination=self.contamination)

def fit(self, data):


self.data = pd.DataFrame(data) # Ensure data is a DataFrame
self.model.fit(self.data.values.reshape(-1, 1))

def detect_anomalies(self):
self.data['anomaly'] = self.model.predict(self.data.values.reshape(-1, 1))
self.data['anomaly'] = self.data['anomaly'].apply(lambda x: 1 if x == -1 else 0)
return self.data

detectors = {}
for ticker, df in processed_data.items():
detector = AnomalyDetector()
detector.fit(df)
detectors[ticker] = detector.detect_anomalies()

Visualizing Anomalies
Let’s visualize the detected anomalies on the stock price charts.
import matplotlib.pyplot as plt

def plot_anomalies(detectors):
for ticker, df in detectors.items():
plt.figure(figsize=(14, 7))
plt.plot(df.index, df.iloc[:, 0], label='Price')
anomalies = df[df['anomaly'] == 1]
plt.scatter(anomalies.index, anomalies.iloc[:, 0], color='red', label='Anomaly')
plt.title(f'Anomalies in {ticker} Stock Prices')
plt.xlabel('Date')
plt.ylabel('Price')
plt.legend()
plt.show()
plot_anomalies(detectors)
# Assuming `detectors` is a dictionary with ticker symbols as keys and DataFrames as values
# plot_anomalies(detectors)
Conclusion
In this tutorial, we explored the process of detecting anomalies in time-series data using Python. We used the yfinance library to
download real financial data and implemented an anomaly detection system using the Isolation Forest algorithm. By visualizing the
detected anomalies, we gained insights into unusual market behavior that could indicate potential opportunities or risks. Anomaly
detection is a powerful tool in the financial sector, helping investors and analysts make informed decisions. By leveraging Python and
machine learning algorithms, we can build robust systems to detect and analyze anomalies in financial data. We hope this tutorial has
provided you with a solid foundation for applying anomaly detection techniques to your own financial data analysis projects.

Loading [MathJax]/jax/output/CommonHTML/fonts/TeX/fontdata.js

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy