An Application of Correlation Clustering to Portfolio Diversification (2014)
Type of ContentDiscussion / Working Papers
PublisherUniversity of Canterbury. Department of Economics and Finance
University of Canterbury. Mathematics and Statistics
This paper presents a novel application of software developed for constructing a phylogenetic network to the correlation matrix for 126 stocks listed on the Shanghai A Stock Market. We show that by visualizing the correlation matrix using a Neighbor-Net network and using the circular ordering produced during the construction of the network we can reduce the risk of a diversified portfolio compared with random or industry group based selection methods in times of market increase.
CitationZhan, H.C.J., Rea, W., Rea, A. (2014) An Application of Correlation Clustering to Portfolio Diversification. University of Canterbury. 49pp..
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KeywordsVisualization; Neighbour-Nets; Correlation Matrix; Diversification
ANZSRC Fields of Research35 - Commerce, management, tourism and services::3502 - Banking, finance and investment::350208 - Investment and risk management
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