Added demo for correlation matrix (#441)

* Added demo for correlation matrix

Author: justinpolygon

examples/rest/demo_correlation_matrix.py

@@ -0,0 +1,136 @@
+"""
+This script computes and visualizes the correlation matrix of a selected set of
+stocks using Polygon's API. This script is for educational purposes only and is
+not intended to provide investment advice. The examples provided analyze the 
+correlation between different stocks from diverse sectors, as well as within 
+specific sectors. 
+
+Before running this script, there are 4 prerequisites:
+
+1) Dependencies: Ensure that the following Python libraries are installed in 
+   your environment:
+   - pandas
+   - numpy
+   - seaborn
+   - matplotlib.pyplot
+   - polygon's python-client library
+
+   You can likely run:
+   pip install pandas numpy seaborn matplotlib polygon-api-client
+
+2) API Key: You will need a Polygon API key to fetch the stock data. This can 
+   be set manually in the script below, or you can set an environment variable 
+   'POLYGON_API_KEY'.
+
+   setx POLYGON_API_KEY "<your_api_key>"   <- windows
+   export POLYGON_API_KEY="<your_api_key>" <- mac/linux
+
+3) Select Stocks: You need to select the stocks you're interested in analyzing.
+   Update the 'symbols' variable in this script with your chosen stock symbols.
+
+4) Select Date Range: You need to specify the date range for the historical 
+   data that you want to fetch. Update the 'start_date' and 'end_date' 
+   variables in this script accordingly.
+
+Understanding stock correlation is important when building a diverse portfolio,
+as it can help manage risk and inform investment strategies. It's always 
+essential to do your own research or consult a financial advisor for 
+personalized advice when investing.
+"""
+import pandas as pd  # type: ignore
+import numpy as np  # type: ignore
+import seaborn as sns  # type: ignore
+import matplotlib.pyplot as plt  # type: ignore
+from polygon import RESTClient
+
+# Less likely to be correlated due to being in different sectors and are
+# exposed to different market forces, economic trends, and price risks.
+# symbols = ["TSLA", "PFE", "XOM", "HD", "JPM", "AAPL", "KO", "UNH", "LMT", "AMZN"]
+
+# Here we have two groups, one with 5 technology stocks and another with 5 oil
+# stocks. These two groups are likely to be highly correlated within their
+# respective sectors but are expected to be less correlated between sectors.
+# symbols = ["AAPL", "MSFT", "GOOG", "ADBE", "CRM", "XOM", "CVX", "COP", "PSX", "OXY"]
+
+# Likely to be highly correlated due to being in the technology sector,
+# specifically in the sub-industry of Semiconductors:
+symbols = ["INTC", "AMD", "NVDA", "TXN", "QCOM", "MU", "AVGO", "ADI", "MCHP", "NXPI"]
+
+# Date range you are interested in
+start_date = "2022-04-01"
+end_date = "2023-05-10"
+
+
+def fetch_stock_data(symbols, start_date, end_date):
+    stocks = []
+
+    # client = RESTClient("XXXXXX") # hardcoded api_key is used
+    client = RESTClient()  # POLYGON_API_KEY environment variable is used
+
+    try:
+        for symbol in symbols:
+            aggs = client.get_aggs(
+                symbol,
+                1,
+                "day",
+                start_date,
+                end_date,
+            )
+            df = pd.DataFrame(aggs, columns=["timestamp", "close"])
+
+            # Filter out rows with invalid timestamps
+            df = df[df["timestamp"] > 0]
+
+            df["timestamp"] = pd.to_datetime(df["timestamp"], unit="ms")
+            df.set_index("timestamp", inplace=True)
+
+            df.rename(columns={"close": symbol}, inplace=True)
+            stocks.append(df)
+    finally:
+        pass
+
+    merged_stocks = pd.concat(stocks, axis=1)
+    return merged_stocks
+
+
+def calculate_daily_returns(stock_data):
+    daily_returns = stock_data.pct_change().dropna()
+    return daily_returns
+
+
+def compute_correlation_matrix(daily_returns):
+    correlation_matrix = daily_returns.corr()
+    return correlation_matrix
+
+
+def plot_correlation_heatmap(correlation_matrix):
+    plt.figure(figsize=(8, 8))
+    ax = sns.heatmap(
+        correlation_matrix,
+        annot=True,
+        cmap="coolwarm",
+        vmin=-1,
+        vmax=1,
+        square=True,
+        linewidths=0.5,
+        cbar_kws={"shrink": 0.8},
+    )
+    ax.xaxis.tick_top()
+    ax.xaxis.set_label_position("top")
+    plt.title("Correlation Matrix Heatmap", y=1.08)
+    plt.show()
+
+
+def main():
+    stock_data = fetch_stock_data(symbols, start_date, end_date)
+    daily_returns = calculate_daily_returns(stock_data)
+    correlation_matrix = compute_correlation_matrix(daily_returns)
+
+    print("Correlation Matrix:")
+    print(correlation_matrix)
+
+    plot_correlation_heatmap(correlation_matrix)
+
+
+if __name__ == "__main__":
+    main()