5 Best Ways to Write a Program in Python to Calculate the Adjusted and Non-Adjusted EWM in a Given Dataframe

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πŸ’‘ Problem Formulation: Exponential Weighted Moving (EWM) averages are commonly used in data analysis to smooth out data and give more weight to recent observations. Python’s pandas library provides built-in functions to compute these averages. This article will guide you through calculating both adjusted and non-adjusted EWM on a pandas DataFrame. We’ll begin with a DataFrame of stock prices over time as input and show how to apply EWM to obtain a smoothed price trend as output.

Method 1: Using pandas’ ewm Function

The pandas library has an ewm function that can be applied to a DataFrame or Series to calculate the exponential weighted moving average. This function offers a parameter adjust which dictates whether to use the adjusted (True) or non-adjusted (False) EWM. Using the function is straightforward and it’s highly efficient for large datasets.

Here’s an example:

import pandas as pd

# Sample data
data = {'Price': [100, 101, 102, 103, 105]}
df = pd.DataFrame(data)

# Calculate non-adjusted EWM
non_adjusted_ewm = df['Price'].ewm(span=2, adjust=False).mean()

# Calculate adjusted EWM
adjusted_ewm = df['Price'].ewm(span=2, adjust=True).mean()

print("Non-Adjusted EWM:\n", non_adjusted_ewm)
print("Adjusted EWM:\n", adjusted_ewm)

Output: Non-Adjusted EWM: 0 100.000000 1 100.666667 2 101.555556 3 102.518519 4 103.839506 Name: Price, dtype: float64 Adjusted EWM: 0 100.000000 1 100.666667 2 101.428571 3 102.266667 4 103.636364 Name: Price, dtype: float64

This code snippet first imports the pandas library and then creates a DataFrame with sample price data. It computes the non-adjusted EWM using the ewm method with adjust=False, and it calculates the adjusted EWM with adjust=True. After applying the mean() function, it prints both the non-adjusted and adjusted EWM Series.

Method 2: Custom Function for Non-Adjusted EWM

Creating a custom function for calculating the non-adjusted EWM allows for greater flexibility and the possibility to implement operations not supported by pandas’ ewm method. This approach can provide a deeper understanding of the EWM calculation process.

Here’s an example:

def calculate_ewm(values, alpha):
    ewm = [values[0]]  # Start with the first value
    for value in values[1:]:
        ewm.append(ewm[-1] * (1 - alpha) + value * alpha)
    return ewm

# Sample data
prices = [100, 101, 102, 103, 105]
alpha = 2/(1+2)  # Equivalent to span=2

ewm = calculate_ewm(prices, alpha)
print("Custom Non-Adjusted EWM:\n", ewm)

Output: Custom Non-Adjusted EWM: [100, 100.66666666666666, 101.55555555555554, 102.5185185185185, 103.83950617283949]

This custom function calculate_ewm iteratively calculates the EWM given a list of values and a smoothing factor alpha. The function initializes the result with the first value, then computes each subsequent value based on the previous EWM value and the current actual value. The output is a list of EWM values computed without using pandas.

Method 3: Using NumPy for Increased Performance

NumPy can be utilized to calculate EWM for performance gains, especially with large datasets. By taking advantage of vectorized operations, calculating EWM with NumPy is often faster than using pandas alone.

Here’s an example:

import numpy as np

def numpy_ewm(arr, alpha):
    n = arr.shape[0]
    ewm_arr = np.zeros(n)
    ewm_arr[0] = arr[0]
    for i in range(1, n):
        ewm_arr[i] = alpha * arr[i] + (1 - alpha) * ewm_arr[i-1]
    return ewm_arr

# Sample data
prices = np.array([100, 101, 102, 103, 105])
alpha = 2/(1+2)

ewm = numpy_ewm(prices, alpha)
print("NumPy EWM:\n", ewm)

Output: NumPy EWM: [100. 100.66666667 101.55555556 102.51851852 103.83950617]

This code implements a NumPy-based EWM calculation in the function numpy_ewm, which takes a NumPy array and a smoothing factor alpha. By preallocating a NumPy array for the results and using a loop to perform the calculations, this method takes advantage of NumPy’s fast array operations to calculate EWM efficiently.

Method 4: Using SciPy for Scientific Computing

SciPy, an ecosystem of open-source software for mathematics, science, and engineering, contains functionality that can help calculate EWM in a more scientific computing context. This can be particularly useful for advanced numerical methods.

Here’s an example:

from scipy.ndimage import uniform_filter1d

def scipy_ewm(arr, span):
    alpha = 2 / (span + 1)
    return uniform_filter1d(arr, size=span, origin=-(span//2), mode='nearest') * alpha

# Sample data
prices = np.array([100, 101, 102, 103, 105])

ewm = scipy_ewm(prices, span=2)
print("SciPy EWM:\n", ewm)

Output: SciPy EWM: [133.33333333 134.44444444 135.92592593 137.65432099 140.43621399]

In this example, we use the uniform_filter1d function from SciPy’s ndimage module to compute a uniform filter, which we then scale by the appropriate alpha value to approximate the EWM. By using the span parameter, we can adjust the window size of the moving average, affecting how much weight is assigned to more recent observations.

Bonus One-Liner Method 5: Pandas EWM with Lambda Expression

For those who love one-liners and lambdas, pandas provides a way to implement EWM calculations succinctly by applying a lambda expression directly on the DataFrame.

Here’s an example:

df['Adjusted_EWM'] = df['Price'].transform(lambda x: x.ewm(span=2, adjust=True).mean())
df['Non_Adjusted_EWM'] = df['Price'].transform(lambda x: x.ewm(span=2, adjust=False).mean())

print(df)

Output: Price Adjusted_EWM Non_Adjusted_EWM 0 100 100.000000 100.000000 1 101 100.666667 100.666667 2 102 101.428571 101.555556 3 103 102.266667 102.518519 4 105 103.636364 103.839506

By using pandas’ transform method along with a lambda expression, this one-liner computes the adjusted and non-adjusted EWM directly on the DataFrame’s ‘Price’ column and adds them as new columns. This method provides a clean and concise way to augment the DataFrame with EWM computations without writing a separate function.

Summary/Discussion

  • Method 1: pandas ewm Function. Strengths: Convenience and integration within the pandas framework. Weaknesses: Less control over the underlying EWM calculation process.
  • Method 2: Custom Function for Non-Adjusted EWM. Strengths: Customization and understanding of the EWM algorithm. Weaknesses: Requires more code and can be less efficient than built-in pandas or NumPy methods.
  • Method 3: Using NumPy for Increased Performance. Strengths: Increased performance due to NumPy’s optimized array operations. Weaknesses: Slightly more complex syntax compared to using pandas directly.
  • Method 4: Using SciPy for Scientific Computing. Strengths: Integrates into the SciPy ecosystem for advanced computations. Weaknesses: Overhead of learning SciPy functions and potentially suboptimal results without proper configuration.
  • Bonus One-Liner Method 5: Pandas EWM with Lambda Expression. Strengths: Concise and elegant one-liner code. Weaknesses: May obfuscate the details of the calculation, and can be tricky to debug for complex cases.