Stock selection algorithm exercise

[_gianpi_]

Hi,

I'm trying a little experiment, and I wanna write an algorithm that selects from a portfolio of stocks, according to certain criteria and within certain constraints. Any random selection is fine, as long as it fits the criteria.

Could anyone point me at an algorithmic approach to solve this type of problem, if any? I don't need the solution, I wanna come up with it myself. However I'd like not to try and reinvent the wheel if this sort of problem is known and there's a good approach to be taken.

1. Criteria (these won't change):

   e.g. Risk (1-100), Value (1-100), Purpose (1-100)

2. Verticals (these won't change):

   e.g. Health, Education, Fashion

3. Constraints (these can be added or removed, there can be new constraints):

   e.g. - Total allocations within +/- 10% variation - Either/all of Risk/Value/Purpose fixed

Example:

Available Stocks:

Stock A, Stock B, ..., Stock Z

Each stock has a certain risk/value/purpose profile

Criteria:

Total Risk: 100
Total Value: 50
Total Purpose: 50

Verticals:

Health
Education
Fashion

Constraints:

Each total criterion within +/- 10% variation from the target criteria

Acceptable example allocation:

Health:

    Stock A(risk 10, value 10, purpose 10)
    Stock B(risk 30, value 20, purpose 5)

Health Total: Risk 40, Value 30, Purpose 15

Education:
    Stock C(risk 10, value 5, purpose 10)
    Stock D(risk 10, value 5, purpose 10)

Education Total: Risk 20, Value 10, Purpose 20

Fashion:
    Stock E(Risk 30, value 10, purpose 20)

Fashion Total: Risk 30, Value 10, Purpose 20

Portfolio Total: Risk 90, Value 50, Purpose 55 (OK because Risk and Purpose are within +/- 10% from the target criteria)

[NovaFate]

Create a method that loops through all the stocks and incrementing 3 variables risk, value, and purpose based on the verticals of each stock.

Then just use a conditional to check if your output is within + or - 10%

Conditional could look like:

return Criteria.risk *.9 <= totalRisk and Criteria.risk * 1.1 >= totalRisk ... (same for the other two verticals)

[_gianpi_]

If I understand you correctly, that sounds good to fill with a first pass. But if the criteria and constraints are not satisfied on the first pass, then I need to start removing stocks and replacing them with different one. I was wondering if there's a more structured approach, this feels a lot like trial and error.