An Application of Correlation Clustering to Portfolio Diversification

Type of content
Discussion / Working Papers
Publisher's DOI/URI
Thesis discipline
Degree name
Publisher
University of Canterbury. Department of Economics and Finance
University of Canterbury. Mathematics and Statistics
Journal Title
Journal ISSN
Volume Title
Language
Date
2014
Authors
Zhan, H.C.J.
Rea, W.
Rea, A.
Abstract

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.

Description
Citation
Zhan, H.C.J., Rea, W., Rea, A. (2014) An Application of Correlation Clustering to Portfolio Diversification. University of Canterbury. 49pp..
Keywords
Visualization, Neighbour-Nets, Correlation Matrix, Diversification
Ngā upoko tukutuku/Māori subject headings
ANZSRC fields of research
Fields of Research::35 - Commerce, management, tourism and services::3502 - Banking, finance and investment::350208 - Investment and risk management
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