Fix bug in beta value computation

Algorithm.CSharp/AddBetaIndicatorNewAssetsRegressionAlgorithm.cs

@@ -0,0 +1,151 @@
+/*
+ * QUANTCONNECT.COM - Democratizing Finance, Empowering Individuals.
+ * Lean Algorithmic Trading Engine v2.0. Copyright 2014 QuantConnect Corporation.
+ * 
+ * Licensed under the Apache License, Version 2.0 (the "License"); 
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at http://www.apache.org/licenses/LICENSE-2.0
+ * 
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+*/
+
+using System;
+using System.Collections.Generic;
+using QuantConnect.Data;
+using QuantConnect.Indicators;
+using QuantConnect.Interfaces;
+using QuantConnect.Orders;
+using QuantConnect.Brokerages;
+
+
+namespace QuantConnect.Algorithm.CSharp
+{
+    /// <summary>
+    /// Regression test to explain how Beta indicator works
+    /// </summary>
+    public class AddBetaIndicatorNewAssetsRegressionAlgorithm : QCAlgorithm, IRegressionAlgorithmDefinition
+    {
+        private Beta _beta;
+        private SimpleMovingAverage _sma;
+        private decimal _lastSMAValue;
+
+        public override void Initialize()
+        {
+            SetStartDate(2015, 05, 08);
+            SetEndDate(2017, 06, 15);
+            SetCash(10000);
+
+            AddCrypto("BTCUSD", Resolution.Daily);
+            AddEquity("SPY", Resolution.Daily);
+
+            EnableAutomaticIndicatorWarmUp = true;
+            _beta = B("BTCUSD", "SPY", 3, Resolution.Daily);
+            _sma = SMA("SPY", 3, Resolution.Daily);
+            _lastSMAValue = 0;
+
+            if (!_beta.IsReady)
+            {
+                throw new RegressionTestException("Beta indicator was expected to be ready");
+            }
+        }
+
+        public override void OnData(Slice slice)
+        {
+            var price = Securities["BTCUSD"].Price;
+
+            if (!Portfolio.Invested)
+            {
+                var quantityToBuy = (int)(Portfolio.Cash * 0.05m / price);
+                Buy("BTCUSD", quantityToBuy);
+            }
+
+            if (Math.Abs(_beta.Current.Value) > 2)
+            {
+                Liquidate("BTCUSD");
+                Log("Liquidated BTCUSD due to high Beta");
+            }
+
+            Log($"Beta between BTCUSD and SPY is: {_beta.Current.Value}");
+        }
+
+        public override void OnOrderEvent(OrderEvent orderEvent)
+        {
+            var order = Transactions.GetOrderById(orderEvent.OrderId);
+            var goUpwards = _lastSMAValue < _sma.Current.Value;
+            _lastSMAValue = _sma.Current.Value;
+
+            if (order.Status == OrderStatus.Filled)
+            {
+                if (order.Type == OrderType.Limit && Math.Abs(_beta.Current.Value - 1) < 0.2m && goUpwards)
+                {
+                    Transactions.CancelOpenOrders(order.Symbol);
+                }
+            }
+
+            if (order.Status == OrderStatus.Canceled)
+            {
+                Log(orderEvent.ToString());
+            }
+        }
+
+        public bool CanRunLocally { get; } = true;
+
+        /// <summary>
+        /// This is used by the regression test system to indicate which languages this algorithm is written in.
+        /// </summary>
+        public virtual List<Language> Languages { get; } = new() { Language.CSharp };
+
+        /// <summary>
+        /// Data Points count of all timeslices of algorithm
+        /// </summary>
+        public long DataPoints => 5798;
+
+        /// <summary>
+        /// Data Points count of the algorithm history
+        /// </summary>
+        public int AlgorithmHistoryDataPoints => 77;
+
+        /// <summary>
+        /// Final status of the algorithm
+        /// </summary>
+        public AlgorithmStatus AlgorithmStatus => AlgorithmStatus.Completed;
+
+        /// <summary>
+        /// This is used by the regression test system to indicate what the expected statistics are from running the algorithm
+        /// </summary>
+        public Dictionary<string, string> ExpectedStatistics => new Dictionary<string, string>
+        {
+            {"Total Orders", "436"},
+            {"Average Win", "0.28%"},
+            {"Average Loss", "-0.01%"},
+            {"Compounding Annual Return", "1.926%"},
+            {"Drawdown", "1.000%"},
+            {"Expectancy", "1.650"},
+            {"Start Equity", "10000.00"},
+            {"End Equity", "10411.11"},
+            {"Net Profit", "4.111%"},
+            {"Sharpe Ratio", "0.332"},
+            {"Sortino Ratio", "0.313"},
+            {"Probabilistic Sharpe Ratio", "74.084%"},
+            {"Loss Rate", "90%"},
+            {"Win Rate", "10%"},
+            {"Profit-Loss Ratio", "25.26"},
+            {"Alpha", "0.003"},
+            {"Beta", "0.001"},
+            {"Annual Standard Deviation", "0.01"},
+            {"Annual Variance", "0"},
+            {"Information Ratio", "-0.495"},
+            {"Tracking Error", "0.111"},
+            {"Treynor Ratio", "2.716"},
+            {"Total Fees", "$0.00"},
+            {"Estimated Strategy Capacity", "$87000.00"},
+            {"Lowest Capacity Asset", "BTCUSD 2XR"},
+            {"Portfolio Turnover", "2.22%"},
+            {"OrderListHash", "4fcffc45d82203bb6ded8a0e86070b4f"}
+        };
+    }
+}

Algorithm.CSharp/AddBetaIndicatorRegressionAlgorithm.cs

@@ -47,7 +47,7 @@ public override void Initialize()
 
             if (!_beta.IsReady)
             {
-                throw new RegressionTestException("_beta indicator was expected to be ready");
+                throw new RegressionTestException("Beta indicator was expected to be ready");
             }
         }
 
@@ -60,7 +60,7 @@ public override void OnData(Slice slice)
                 LimitOrder("IBM", 10, price * 0.1m);
                 StopMarketOrder("IBM", 10, price / 0.1m);
             }
-            
+
             if (_beta.Current.Value < 0m || _beta.Current.Value > 2.80m)
             {
                 throw new RegressionTestException($"_beta value was expected to be between 0 and 2.80 but was {_beta.Current.Value}");

Indicators/Beta.cs

@@ -16,6 +16,8 @@
 using System;
 using QuantConnect.Data.Market;
 using MathNet.Numerics.Statistics;
+using QuantConnect.Securities;
+using NodaTime;
 
 namespace QuantConnect.Indicators
 {
@@ -49,6 +51,36 @@ public class Beta : BarIndicator, IIndicatorWarmUpPeriodProvider
         /// </summary>
         private readonly Symbol _targetSymbol;
 
+        /// <summary>
+        /// Stores the previous input data point.
+        /// </summary>
+        private IBaseDataBar _previousInput;
+
+        /// <summary>
+        /// Indicates whether the previous symbol is the target symbol.
+        /// </summary>
+        private bool _previousSymbolIsTarget;
+
+        /// <summary>
+        /// Indicates if the time zone for the target and reference are different.
+        /// </summary>
+        private bool _isTimezoneDifferent;
+
+        /// <summary>
+        /// Time zone of the target symbol.
+        /// </summary>
+        private DateTimeZone _targetTimeZone;
+
+        /// <summary>
+        /// Time zone of the reference symbol.
+        /// </summary>
+        private DateTimeZone _referenceTimeZone;
+
+        /// <summary>
+        /// The resolution of the data (e.g., daily, hourly, etc.).
+        /// </summary>
+        private Resolution _resolution;
+
         /// <summary>
         /// RollingWindow of returns of the target symbol in the given period
         /// </summary>
@@ -72,7 +104,7 @@ public class Beta : BarIndicator, IIndicatorWarmUpPeriodProvider
         /// <summary>
         /// Gets a flag indicating when the indicator is ready and fully initialized
         /// </summary>
-        public override bool IsReady => _targetDataPoints.Samples >= WarmUpPeriod && _referenceDataPoints.Samples >= WarmUpPeriod;
+        public override bool IsReady => _targetReturns.IsReady && _referenceReturns.IsReady;
 
         /// <summary>
         /// Creates a new Beta indicator with the specified name, target, reference,  
@@ -88,10 +120,8 @@ public Beta(string name, Symbol targetSymbol, Symbol referenceSymbol, int period
             // Assert the period is greater than two, otherwise the beta can not be computed
             if (period < 2)
             {
-                throw new ArgumentException($"Period parameter for Beta indicator must be greater than 2 but was {period}");
+                throw new ArgumentException($"Period parameter for Beta indicator must be greater than 2 but was {period}.");
             }
-
-            WarmUpPeriod = period + 1;
             _referenceSymbol = referenceSymbol;
             _targetSymbol = targetSymbol;
 
@@ -101,6 +131,11 @@ public Beta(string name, Symbol targetSymbol, Symbol referenceSymbol, int period
             _targetReturns = new RollingWindow<double>(period);
             _referenceReturns = new RollingWindow<double>(period);
             _beta = 0;
+            var dataFolder = MarketHoursDatabase.FromDataFolder();
+            _targetTimeZone = dataFolder.GetExchangeHours(_targetSymbol.ID.Market, _targetSymbol, _targetSymbol.ID.SecurityType).TimeZone;
+            _referenceTimeZone = dataFolder.GetExchangeHours(_referenceSymbol.ID.Market, _referenceSymbol, _referenceSymbol.ID.SecurityType).TimeZone;
+            _isTimezoneDifferent = _targetTimeZone != _referenceTimeZone;
+            WarmUpPeriod = period + 1 + (_isTimezoneDifferent ? 1 : 0);
         }
 
         /// <summary>
@@ -142,30 +177,87 @@ public Beta(string name, int period, Symbol targetSymbol, Symbol referenceSymbol
         /// <returns>The beta value of the target used in relation with the reference</returns>
         protected override decimal ComputeNextValue(IBaseDataBar input)
         {
-            var inputSymbol = input.Symbol;
-            if (inputSymbol == _targetSymbol)
-            {
-                _targetDataPoints.Add(input.Close);
-            } 
-            else if(inputSymbol == _referenceSymbol)
+            if (_previousInput == null)
             {
-                _referenceDataPoints.Add(input.Close);
+                _previousInput = input;
+                _previousSymbolIsTarget = input.Symbol == _targetSymbol;
+                var timeDifference = input.EndTime - input.Time;
+                _resolution = timeDifference.TotalHours > 1 ? Resolution.Daily : timeDifference.ToHigherResolutionEquivalent(false);
+                return decimal.Zero;
             }
-            else
+
+            var inputEndTime = input.EndTime;
+            var previousInputEndTime = _previousInput.EndTime;
+
+            if (_isTimezoneDifferent)
             {
-                throw new ArgumentException("The given symbol was not target or reference symbol");
+                inputEndTime = inputEndTime.ConvertToUtc(_previousSymbolIsTarget ? _referenceTimeZone : _targetTimeZone);
+                previousInputEndTime = previousInputEndTime.ConvertToUtc(_previousSymbolIsTarget ? _targetTimeZone : _referenceTimeZone);
             }
 
-            if (_targetDataPoints.Samples == _referenceDataPoints.Samples && _referenceDataPoints.Count > 1)
+            // Process data if symbol has changed and timestamps match
+            if (input.Symbol != _previousInput.Symbol && TruncateToResolution(inputEndTime) == TruncateToResolution(previousInputEndTime))
             {
-                _targetReturns.Add(GetNewReturn(_targetDataPoints));
-                _referenceReturns.Add(GetNewReturn(_referenceDataPoints));
-
+                AddDataPoint(input);
+                AddDataPoint(_previousInput);
                 ComputeBeta();
             }
+            _previousInput = input;
+            _previousSymbolIsTarget = input.Symbol == _targetSymbol;
             return _beta;
         }
 
+        /// <summary>
+        /// Truncates the given DateTime based on the specified resolution (Daily, Hourly, Minute, or Second).
+        /// </summary>
+        /// <param name="date">The DateTime to truncate.</param>
+        /// <returns>A DateTime truncated to the specified resolution.</returns>
+        private DateTime TruncateToResolution(DateTime date)
+        {
+            switch (_resolution)
+            {
+                case Resolution.Daily:
+                    return date.Date;
+                case Resolution.Hour:
+                    return date.Date.AddHours(date.Hour);
+                case Resolution.Minute:
+                    return date.Date.AddHours(date.Hour).AddMinutes(date.Minute);
+                case Resolution.Second:
+                    return date;
+                default:
+                    return date;
+            }
+        }
+
+        /// <summary>
+        /// Adds the closing price to the corresponding symbol's data set (target or reference).
+        /// Computes returns when there are enough data points for each symbol.
+        /// </summary>
+        /// <param name="input">The input value for this symbol</param>
+        private void AddDataPoint(IBaseDataBar input)
+        {
+            if (input.Symbol == _targetSymbol)
+            {
+                _targetDataPoints.Add(input.Close);
+                if (_targetDataPoints.Count > 1)
+                {
+                    _targetReturns.Add(GetNewReturn(_targetDataPoints));
+                }
+            }
+            else if (input.Symbol == _referenceSymbol)
+            {
+                _referenceDataPoints.Add(input.Close);
+                if (_referenceDataPoints.Count > 1)
+                {
+                    _referenceReturns.Add(GetNewReturn(_referenceDataPoints));
+                }
+            }
+            else
+            {
+                throw new ArgumentException($"The given symbol {input.Symbol} was not {_targetSymbol} or {_referenceSymbol} symbol");
+            }
+        }
+
         /// <summary>
         /// Computes the returns with the new given data point and the last given data point
         /// </summary>
@@ -174,7 +266,7 @@ protected override decimal ComputeNextValue(IBaseDataBar input)
         /// <returns>The returns with the new given data point</returns>
         private static double GetNewReturn(RollingWindow<decimal> rollingWindow)
         {
-            return (double) ((rollingWindow[0].SafeDivision(rollingWindow[1]) - 1));
+            return (double)((rollingWindow[0].SafeDivision(rollingWindow[1]) - 1));
         }
 
         /// <summary>
@@ -189,17 +281,17 @@ private void ComputeBeta()
             // Avoid division with NaN or by zero
             var variance = !varianceComputed.IsNaNOrZero() ? varianceComputed : 1;
             var covariance = !covarianceComputed.IsNaNOrZero() ? covarianceComputed : 0;
-            _beta = (decimal) (covariance / variance);
+            _beta = (decimal)(covariance / variance);
         }
 
         /// <summary>
         /// Resets this indicator to its initial state
         /// </summary>
         public override void Reset()
         {
+            _previousInput = null;
             _targetDataPoints.Reset();
             _referenceDataPoints.Reset();
-
             _targetReturns.Reset();
             _referenceReturns.Reset();
             _beta = 0;