# Linear Shrinkage of Covariance Matrices

# Sample Covariance Matrix

Suppose that the goal is to estimate the covariance matrix \(\boldsymbol \Sigma\) based on a sample of \(N\) independent and identically distributed \(p\) random vectors \(\mathbf X_1, \mathbf X_2, \ldots, \mathbf X_N\). The sample covariance matrix is defined by \[ \mathbf S = \frac{1}{N - 1} \sum_{i=1}^{N} (\mathbf X_i - \bar {\mathbf X})(\mathbf X_i - \bar {\mathbf X})^{T} \]

where \(\bar {\mathbf X} = \sum_{i=1}^{N} \mathbf X_{i}/N\) is the sample mean vector.

Although \(\mathbf S\) is a natural estimator of the covariance matrix \(\boldsymbol \Sigma\), it is known that \(\mathbf S\) is problematic in high-dimensional settings, i.e. when the number of features \(p\) (i.e. the dimension of the \(N\) vectors) is a lot larger than the sample size \(N\). For example, \(\mathbf S\) is singular in high-dimensional settings while \(\boldsymbol \Sigma\) is a positive-definite matrix.

## Steinian Estimators

A simple solution is to consider covariance estimators of the form \[ \mathbf S^{\ast}_{\mathbf T} = \left( 1 - \lambda_{\mathbf T} \right) \mathbf S + \lambda_{\mathbf T} \mathbf T \]

where \(\mathbf T\) is a known positive-definite covariance matrix and \(0 < \lambda_{\mathbf T} < 1\) is the known optimal intensity. The advantages of \(\mathbf S^{\ast}_{\mathbf T}\) include that it is: (i) non-singular (ii) well-conditioned, (iii) invariant to permutations of the order of the \(p\) variables, (iv) consistent to departures from a multivariate normal model, (v) not necessarily sparse, (vi) expressed in closed form, and (vii) computationally cheap regardless of \(p\).

In practice, the optimal shrinkage intensity \(\lambda_{\mathbf T}\) is unknown and needs to be estimated by minimizing a risk function, such as the expectation of the Frobenius norm of the difference between \(\mathbf S^{\ast}_{\mathbf T}\) and \(\boldsymbol \Sigma\). This package implements the estimation procedures for \(\lambda_{\mathbf T}\) described in Touloumis (2015).

# Target Covariance Matrix

Let \(s^{2}_{11}, s^{2}_{22}, \ldots, s^{2}_{pp}\) be the corresponding diagonal elements of the sample covariance matrix \(\mathbf S\), that is the sample variances of the \(p\) features.

The `diagonal` target covariance matrix \(\mathbf T_{D}\) is a diagonal matrix whose diagonal elements are equal to the sample variances

\[ \mathbf T_{D} = \begin{bmatrix} s_{11}^{2} & 0 & \ldots & 0 \\ 0 & s_{22}^{2} & \ddots & \vdots \\ \vdots & \ddots & \ddots & 0 \\ 0 & \ldots & 0 & s_{pp}^{2} \\ \end{bmatrix}. \]

The `spherical` target covariance matrix \(\mathbf T_{S}\) is the diagonal matrix

\[ \mathbf T_{S} = \begin{bmatrix} s^{2} & 0 & \ldots & 0 \\ 0 & s^{2} & \ddots & \vdots \\ \vdots & \ddots & \ddots & 0 \\ 0 & \ldots & 0 & s^{2}\\ \end{bmatrix}. \]

where \(s^{2}\) is the average of the sample variances

\[ s^2 = \frac{1}{p} \sum_{k=1}^{p} s_{kk}^{2}. \]

The `identity` target covariance matrix \(\mathbf T_{I}\) is the \(p \times p\) identity matrix

\[ \mathbf T_{I} = \mathbf I_{p} = \begin{bmatrix} 1 & 0 & \ldots & 0 \\ 0 & 1 & \ddots & \vdots \\ \vdots & \ddots & \ddots & 0 \\ 0 & \ldots & 0 & 1 \\ \end{bmatrix}. \]

## Positive-definiteness of the Target Matrices

1. The `identity` covariance target matrix \(\mathbf T_{I}\) is always positive-definite.
2. The `spherical` covariance target matrix is \(\mathbf T_{S}\) is positive-definite provided that at least one of the \(p\) sample variances is not \(0\).
3. The `diagonal` covariance target matrix \(\mathbf T_{D}\) is positive-definite provided that none of the \(p\) sample variances is equal to \(0\).

An error message will be returned when \(\mathbf T_{D}\) or \(\mathbf T_{S}\) will not be positive-definite. In this case, the user should either remove all the features (rows) whose sample variance is \(0\) or use a different target matrix (e.g. \(\mathbf T_{I}\)).

## Selection of Target Matrix

In practice, to select a suitable target covariance matrix, one can inspect the optimal shrinkage intensity of the three possible target matrices. If these differ significantly, then one can choose as target matrix the one with the largest \(\lambda\) value. Otherwise, the choice of the target matrix can be based on examining the \(p\) sample variances.

The `identity` target matrix \(\mathbf T_{I}\) is sensible when all the values of the \(p\) sample variances are close to \(1\) \[ s^{2}_{11} \approx s^{2}_{11} \approx \ldots \approx s^{2}_{pp} \approx 1. \]

The `spherical` target covariance matrix \(\mathbf T_{S}\) is sensible when the range of the \(p\) sample variances is small \[ s^{2}_{11} \approx s^{2}_{22} \approx \ldots \approx s^{2}_{pp}. \]

The `diagonal` target covariance matrix \(\mathbf T_{D}\) is sensible when the values of the \(p\) sample variances vary significantly.

Hence, the target matrix selection should be based on inspecting the optimal shrinkage intensities and the range and average of the \(p\) sample variances.

# Example

The colon cancer data, analyzed in Touloumis (2015), consists of two tissue groups: the normal tissue group and the tumor tissue group.

    library("ShrinkCovMat")
    data("colon")
    normal_group <- colon[, 1:40]
    dim(normal_group)
    #> [1] 2000   40
    tumor_group <- colon[, 41:62]
    dim(tumor_group)
    #> [1] 2000   22

For each of the \(40\) subjects in the normal group, their gene expression levels were measured for \(2000\) genes. To select the target matrix for covariance matrix of the normal group, we use the function `targetselection`:

    targetselection(normal_group)
    #> ESTIMATED SHRINKAGE INTENSITIES WITH TARGET MATRIX THE
    #> Spherical matrix : 0.1401
    #> Identity  matrix : 0.1125
    #> Diagonal  matrix : 0.14
    #>
    #> SAMPLE VARIANCES
    #> Range   : 0.4714
    #> Average : 0.0882

The estimated optimal shrinkage intensity for the `spherical` matrix is slightly larger than the other two. In addition the sample variances appear to be of similar magnitude and their average is smaller than \(1\). Thus, the `spherical` matrix seems to be the most appropriate target for the covariance matrix. The resulting covariance matrix estimate is:

    estimated_covariance_normal <- shrinkcovmat(normal_group, target = "spherical")
    estimated_covariance_normal
    #> SHRINKAGE ESTIMATION OF THE COVARIANCE MATRIX
    #>
    #> Estimated Optimal Shrinkage Intensity = 0.1401
    #>
    #> Estimated Covariance Matrix [1:5,1:5] =
    #>        [,1]   [,2]   [,3]   [,4]   [,5]
    #> [1,] 0.0396 0.0107 0.0101 0.0214 0.0175
    #> [2,] 0.0107 0.0499 0.0368 0.0171 0.0040
    #> [3,] 0.0101 0.0368 0.0499 0.0147 0.0045
    #> [4,] 0.0214 0.0171 0.0147 0.0523 0.0091
    #> [5,] 0.0175 0.0040 0.0045 0.0091 0.0483
    #>
    #> Target Matrix [1:5,1:5] =
    #>        [,1]   [,2]   [,3]   [,4]   [,5]
    #> [1,] 0.0882 0.0000 0.0000 0.0000 0.0000
    #> [2,] 0.0000 0.0882 0.0000 0.0000 0.0000
    #> [3,] 0.0000 0.0000 0.0882 0.0000 0.0000
    #> [4,] 0.0000 0.0000 0.0000 0.0882 0.0000
    #> [5,] 0.0000 0.0000 0.0000 0.0000 0.0882

We follow a similar procedure to estimate the covariance matrix of the tumor group:

    targetselection(tumor_group)
    #> ESTIMATED SHRINKAGE INTENSITIES WITH TARGET MATRIX THE
    #> Spherical matrix : 0.1956
    #> Identity  matrix : 0.1705
    #> Diagonal  matrix : 0.1955
    #>
    #> SAMPLE VARIANCES
    #> Range   : 0.4226
    #> Average : 0.0958
    estimated_covariance_tumor <- shrinkcovmat(tumor_group, target = "spherical")
    estimated_covariance_tumor
    #> SHRINKAGE ESTIMATION OF THE COVARIANCE MATRIX
    #>
    #> Estimated Optimal Shrinkage Intensity = 0.1956
    #>
    #> Estimated Covariance Matrix [1:5,1:5] =
    #>        [,1]   [,2]   [,3]   [,4]   [,5]
    #> [1,] 0.0490 0.0179 0.0170 0.0195 0.0052
    #> [2,] 0.0179 0.0450 0.0265 0.0092 0.0034
    #> [3,] 0.0170 0.0265 0.0465 0.0084 0.0031
    #> [4,] 0.0195 0.0092 0.0084 0.0498 0.0036
    #> [5,] 0.0052 0.0034 0.0031 0.0036 0.0361
    #>
    #> Target Matrix [1:5,1:5] =
    #>        [,1]   [,2]   [,3]   [,4]   [,5]
    #> [1,] 0.0958 0.0000 0.0000 0.0000 0.0000
    #> [2,] 0.0000 0.0958 0.0000 0.0000 0.0000
    #> [3,] 0.0000 0.0000 0.0958 0.0000 0.0000
    #> [4,] 0.0000 0.0000 0.0000 0.0958 0.0000
    #> [5,] 0.0000 0.0000 0.0000 0.0000 0.0958

# Compatibility

Version 2.0.0 introduces the function `shrinkcovmat` which in the next release of `ShrinkCovMat` will replace the deprecated functions `shinkcovmat.identity`, `shrinkcovmat.equal` and `shrinkcovmat.unequal`. The table below illustrates the changes:

Deprecated functions since v2.0.0 and their replacements in newer versions.
Deprecated | Replacement
--- | ---
`shrinkcovmat.identity(data)` | `shrinkcovmat(data, target = 'identity')`
`shrinkcovmat.identity(data)` | `shrinkcovmat(data, target = 'spherical')`
`shrinkcovmat.unequal(data)` | `shrinkcovmat(data, target = 'diagonal')`

# How To Cite

    citation("ShrinkCovMat")
    #> To cite 'ShrinkCovMat' in publications, please use:
    #>
    #>   Touloumis A. (2015). "Nonparametric Stein-type Shrinkage Covariance
    #>   Matrix Estimators in High-Dimensional Settings." _Computational
    #>   Statistics & Data Analysis_, *83*, 251-261.
    #>   <https://doi.org/10.1016/j.csda.2014.10.018>.
    #>
    #> A BibTeX entry for LaTeX users is
    #>
    #>   @Article{,
    #>     title = {Nonparametric Stein-type Shrinkage Covariance Matrix Estimators in High-Dimensional Settings},
    #>     author = {{Touloumis A.}},
    #>     year = {2015},
    #>     journal = {Computational Statistics & Data Analysis},
    #>     volume = {83},
    #>     pages = {251-261},
    #>     url = {https://doi.org/10.1016/j.csda.2014.10.018},
    #>   }