for background please see prior posts Horizon Plot Already Available and Cubism Horizon Charts in R
Good visualization simplifies, and stories are better told with effective and pretty visualizations.
Although horizon plots are not immediately intuitive, I have embraced them as an extremely effective method of analyzing more than four series. I hope they become much more popular, so I can use them with much more confidence. If we look at a traditional cumulative growth chart on the managers dataset provided by PerformanceAnalytics, I get confused by too many lines and colors since there are 10 different series. While this chart works, it can be better.
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From TimelyPortfolio |
We could panel the data, but I think this makes comparison even more difficult.
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From TimelyPortfolio |
In this case and many others, horizon plots provide what I feel to be both a more attractive and effective visualization. Here is an example using latticeExtra’s horizonplot function with very little adjustment. You can detect both comovement or seasonality and can compare the amplitude simultaneously.
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From TimelyPortfolio |
With a little additional formatting, we can get an ideal visualization-pretty and effective. The ability to scale well beyond 10 series offers power that we cannot obtain with a traditional line chart.
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From TimelyPortfolio |
As another example, let’s look at how we can use horizon plots to monitor a moving average system similar to the Mebane Faber's timing model. If you follow the link, you can see a decent visualization of the price and moving average. A horizon plot could accomplish this much more efficiently.
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From TimelyPortfolio |
I personally like the mirrored horizon plot even better. Let’s incorporate that.
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From TimelyPortfolio |
Please help me popularize these extremely powerful charts.
I am completely unsure how to interpret these charts, especially given that only one of them has y-axis labels. Can you take one of the charts as an example and explain what it shows?
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