Hands-On Machine Learning for Algorithmic Trading

How to analyze feature interaction

Lastly, SHAP values allow us to gain additional insights into the interaction effects between different features by separating these interactions from the main effects. The shap.dependence_plot can be defined as follows:

shap.dependence_plot("return_1m", shap_values, X_test, interaction_index=2, title='Interaction between 1- and 3-Month Returns')

It displays how different values for 1-month returns (on the x axis) affect the outcome (SHAP value on the y axis), differentiated by 3-month returns:

SHAP values provide granular feature attribution at the level of each individual prediction, and enable much richer ...