Trading (version 3.2)

VariationOfInformation: Variation of Information

Description

Calculates the variation of information of the track records of two assets/strategies based on the sample entropy.

Usage

VariationOfInformation(x, y, m = 2, r = 0.2, normalized = TRUE)

Value

A value containing the variation of information

Arguments

x

a vector containing the track record of the underlying asset/strategy, this will be normalized during the algorithm

y

a vector containing the track record of the underlying asset/strategy, this will be normalized during the algorithm

m

an integer value defining the embedding dimension , default value is 2

r

a double value defining the tolerance, default value is 0.2

normalized

a boolean value so as to bound the return value between 0 and 1, default value is TRUE

Author

Tasos Grivas <[e-mail]>

References

Lopez de Prado, Marcos, Codependence (Presentation Slides) (January 2, 2020). Available at SSRN: https://ssrn.com/abstract=3512994

Examples

x = PerformanceAnalytics::edhec[,c("Short Selling")]
y = PerformanceAnalytics::edhec[,c("Convertible Arbitrage")]
variation_of_information = VariationOfInformation(x, y, m=2, r=0.2, normalized = TRUE)