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Asian Journal of Management
Year : 2020, Volume : 11, Issue : 2
First page : ( 207) Last page : ( 212)
Print ISSN : 0976-495X. Online ISSN : 2321-5763.
Article DOI : 10.5958/2321-5763.2020.00032.3

Portfolio Construction and testing using Cluster Analysis

Saji Anju Ans, Joseph Joshna Joys Maria*, Dr Kumar B Sathish

Christ (Deemed to be University) Hosur Road, Bengaluru 560029, Karnataka, India

*Corresponding Author E-mail: joshna.joseph@mcom.christuniversity.in

Online published on 10 August, 2020.

Abstract

In this research article, we aim to build an efficient portfolio by using the following selected variables like Price to Earnings ratio, Total returns, Turnover, Price to Book value ratio and Dividend Yield of Nifty 50 companies. This paper has applied the K-mean clustering approach to construct an optimal portfolio that yields maximum returns. An optimal portfolio satisfies the need for diversifying the investment pattern to minimise risk. We have considered five variables between the periods of April 2015 to March 2018 to cluster these stocks. The efficiency of the three clusters formed was measured using the stock return value of each stock. The total of the stock returns in each cluster where calculated. After the evaluation of these total returns, the first cluster showed the maximum return when compared to the other two clusters.

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Keywords

Cluster analysis, K-means, Portfolio construction.

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