Synthetix Debt Pool Hedging Math

This code aggregates the data from the synthetix pool and backtests returns to calculate the optimal weights for sUSD, sETH, and sBTC to capture that highest r^2 possible. This optimal portfolio would allow the user to stay neutral to the debt-pool, accumulating pure yield on staked snx.

from sys import excepthook
import yfinance as yf
from datetime import datetime
import numpy as np
import matplotlib.pyplot as plt

indices = (yf.download(tickers="EURUSD=X", period="3mo", interval="1d").index)
eth = yf.download(tickers="ETH-USD", period="3mo", interval="1d")
eth = eth.filter(items = indices, axis=0)['Close'].to_numpy()

btc = yf.download(tickers="BTC-USD", period="3mo", interval="1d")
btc = btc.filter(items = indices, axis=0)['Close'].to_numpy()

jpy = yf.download(tickers="JPYUSD=X", period="3mo", interval="1d")['Close'].to_numpy()
chf = yf.download(tickers="CHFUSD=X", period="3mo", interval="1d")['Close'].to_numpy()
aud = yf.download(tickers="AUDUSD=X", period="3mo", interval="1d")['Close'].to_numpy()

matic = yf.download(tickers="MATIC-USD", period="3mo", interval="1d")
matic = matic.filter(items = indices, axis=0)['Close'].to_numpy()

eur = yf.download(tickers="EURUSD=X", period="3mo", interval="1d")['Close'].to_numpy()
usd = np.ones(eur.shape)

assets = [usd, eth, btc, eur, jpy, chf, aud, matic]
assets = np.array(assets)
returns = assets[:, 1:] / assets[:, :-1]
weights = np.array([.6338, .1662, .1014, .0487, .0283, .0153, .0051, .0012])
pool_returns = weights @ returns
sim_returns = returns[:3]
m = np.linalg.lstsq(sim_returns.T, pool_returns.T, rcond=None)[0]
print(m, "weights")
yhat = m @ sim_returns
plt.plot(pool_returns, color="red")
plt.plot(yhat, color="blue")
r2 = np.corrcoef(yhat, pool_returns)[0,1]
plt.title("debt pool returns vs hedge returns " + str(r2) + " r^2")
plt.show()
plt.scatter(np.arange(len(pool_returns)), (pool_returns - yhat))
plt.title("residual scatter plot")
plt.show()