chiPlot: Plot the dendrogram of a CHI portfolio

In jpfitzinger/ClusterPortfolios: Portfolio Optimization based on statistical clustering techniques

Plot the dendrogram of a CHI portfolio

Description

Plots the dendrogram of a CHI portfolio.

Usage

chiPlot(
  sigma,
  mu = NULL,
  meta_loss = c("MaxDiv", "ERC"),
  UB = NULL,
  LB = NULL,
  groups = NULL,
  group.UB = NULL,
  group.LB = NULL,
  gamma = 0,
  max_tilt = 1,
  max_leaf_size = 3,
  ymax = NULL,
  horiz = FALSE,
  ...
)

Arguments

sigma	a (N \times N) covariance matrix.
mu	a (N \times 1) vector of estimated returns.
meta_loss	a loss function of the most diversified hierarchical allocation graph.
UB	scalar or (N\times 1) vector of upper bound weight constraints.
LB	scalar or (N\times 1) vector of lower bound weight constraints.
groups	vector of group IDs. The names of the vector must be identical to the asset names.
group.UB	scalar or (N_groups\times 1) vector of upper bound group constraints.
group.LB	scalar or (N_groups\times 1) vector of lower bound group constraints.
gamma	risk aversion parameter. Default: gamma = 0 returns the minimum variance portfolio.
max_tilt	maximum percentage reduction in the effective number of assets. Default: max_tilt = 1 (no restriction).
max_leaf_size	maximum size of the leaf nodes. Default is max_leaf_size=3.
ymax	upper limit for y axis
horiz	rotate the dendrogram
...	arguments passed to cluster::agnes method.

Details

The dendrogram is generated using hierarchical clustering and modified so that the height differential between any two splits is the shrinkage weight of the lower split (ranging between 0 and 1). With no shrinkage, all shrinkage weights are equal to 1 and the dendrogram has a height of p. With shrinkage the dendrogram has a height of (\kappa \times p).

The leaf nodes are colored to indicate the coefficient sign, with the size indicating the absolute magnitude of the coefficients.

A color bar on the right indicates the relative contribution of each level to the coefficient of determination, with darker hues representing a larger contribution.

Value

A plotted dendrogram.

Author(s)

Johann Pfitzinger

See Also

CHI and chiSigma methods

Examples

# Load returns of assets or portfolios
data("Industry_10")
rets <- Industry_10
sigma <- cov(rets)
chiPlot(sigma, UB = 0.15)

jpfitzinger/ClusterPortfolios documentation built on Sept. 27, 2024, 11:18 p.m.