%0 Journal Article
%T An Application of Correlation Clustering to Portfolio Diversification
%A Hannah Cheng Juan Zhan
%A William Rea
%A Alethea Rea
%J Quantitative Finance
%D 2015
%I arXiv
%X This paper presents a novel application of a clustering algorithm 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.
%U http://arxiv.org/abs/1511.07945v1