#### NOTE
[Go to the end](#sphx-glr-download-auto-examples-pre-selection-plot-3-custom-pre-selection-volumes-py)
to download the full example code or to run this example in your browser via JupyterLite.
# Custom Pre-selection Using Volumes
This tutorial demonstrates how to implement a custom [pre-selection transformer](https://skfolio.org/user_guide/pre_selection.html.md#pre-selection) with [metadata-routing](https://skfolio.org/user_guide/metadata_routing.html.md#metadata-routing), integrate it into
a `Pipeline`, and run walk-forward cross-validation.
## Data
We will use the S&P 500 [dataset](https://skfolio.org/user_guide/datasets.html.md#datasets), which contains daily prices
of 20 assets from the S&P 500 Index, spanning from 1990-01-02 to 2022-12-28:
```Python
import numpy as np
import sklearn.base as skb
import sklearn.feature_selection as skf
import sklearn.utils.validation as skv
from plotly.io import show
from sklearn import set_config
from sklearn.pipeline import Pipeline
from sklearn.utils.validation import validate_data
from skfolio.datasets import load_sp500_dataset
from skfolio.model_selection import (
WalkForward,
cross_val_predict,
)
from skfolio.optimization import EqualWeighted
from skfolio.preprocessing import prices_to_returns
prices = load_sp500_dataset()
X = prices_to_returns(prices)
```
For simplicity, we will generate random volume data:
```Python
volumes_usd = np.random.rand(*X.shape) * 1e6
```
## Custom Pre-selection Transformer
Let’s create a custom pre-selection transformer to retain the top x% of assets
with the highest average volumes during the fitting period.
```Python
class VolumePreSelection(skf.SelectorMixin, skb.BaseEstimator):
to_keep_: np.ndarray
def __init__(self, pct_to_keep: float = 0.5):
self.pct_to_keep = pct_to_keep
def fit(self, X, y=None, volumes=None):
# Validate and convert X to a NumPy array
X = validate_data(self, X)
# Check parameters
if not 0 < self.pct_to_keep <= 1:
raise ValueError("`pct_to_keep` must be between 0 and 1")
# Validate and convert volumes to a NumPy array
volumes = skv.check_array(
volumes,
accept_sparse=False,
ensure_2d=False,
dtype=[np.float64, np.float32],
order="C",
copy=False,
input_name="volumes",
)
if volumes.shape != X.shape:
raise ValueError(
f"Volume data {volumes.shape} must have the same dimensions as X {X.shape}"
)
n_assets = X.shape[1]
mean_volumes = volumes.mean(axis=0)
# Select the top `pct_to_keep` assets with the highest average volumes
n_to_keep = max(1, round(self.pct_to_keep * n_assets))
selected_idx = np.argsort(mean_volumes)[-n_to_keep:]
# Performance tip: `argpartition` could be used here for better efficiency
# (O(n log(n)) vs O(n)).
self.to_keep_ = np.isin(np.arange(n_assets), selected_idx)
return self
def _get_support_mask(self):
skv.check_is_fitted(self)
return self.to_keep_
```
## Pipeline
We create a `Pipeline` that uses our custom pre-selection transformer to retain the
top 30% of assets based on average volume, followed by an equal-weighted allocation.
Since we are using volume metadata, we enable metadata-routing and specify how
to route it with `set_fit_request`:
```Python
set_config(enable_metadata_routing=True, transform_output="pandas")
model = Pipeline(
[
(
"pre_selection",
VolumePreSelection(pct_to_keep=0.3).set_fit_request(volumes=True),
),
("optimization", EqualWeighted()),
]
)
```
## Cross-Validation
We will cross-validate the model using a Walk Forward that rebalances
the portfolio every 3 months on the 3rd Friday, training on the preceding 6 months:
```Python
cv = WalkForward(test_size=3, train_size=6, freq="WOM-3FRI")
pred = cross_val_predict(model, X, cv=cv, params={"volumes": volumes_usd})
```
Display the weights for each rebalancing period:
```Python
pred.composition
```
[plotly figure stripped from llms output]
Plot the full out-of-sample walk-forward path:
```Python
pred.plot_cumulative_returns()
```
[plotly figure stripped from llms output]
**Total running time of the script:** (0 minutes 2.245 seconds)
[](../../lite/lab/index.html?path=auto_examples/pre_selection/plot_3_custom_pre_selection_volumes.ipynb)
[`Download Jupyter notebook: plot_3_custom_pre_selection_volumes.ipynb`](https://skfolio.org/auto_examples/pre_selection/_downloads/704f2b4e1f348fa48306e72e53fd5666/plot_3_custom_pre_selection_volumes.ipynb)
[`Download Python source code: plot_3_custom_pre_selection_volumes.py`](https://skfolio.org/auto_examples/pre_selection/_downloads/96a690aeb81b76e7ee21615c05802b05/plot_3_custom_pre_selection_volumes.py)
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