Construction and Analysis of Low-Risk Portfolios Based on Stock Correlations

DOI

10.2991/978-94-6463-742-7_15How to use a DOI?

Keywords

Portfolio Optimization; Centrality; Cosine Similarity

Abstract

Portfolio management is a decision-making process that aims to achieve optimal returns with minimal risk. In financial markets, assets are not independent but are interconnected through various complex relationships. These intricate relationships are detrimental to the diversification of portfolio risk. To account for risk in investment decisions, we propose a low-risk portfolio construction strategy based on correlation. First, we construct a scoring index to measure stock correlations. The introduced scoring index combines the inherent company links and the similarity of stock price trends. Second, we propose an asset selection strategy based on stock correlation rankings. Empirical analysis demonstrates the effectiveness of the proposed strategy. The scoring metric offers a comprehensive evaluation of both the time-series and external correlations between assets. The low-risk strategy derived from these correlations provides a robust investment approach for risk-averse investors.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Download article (PDF)

TY  - CONF
AU  - Jing Wang
AU  - Kui Fu
PY  - 2025
DA  - 2025/05/31
TI  - Construction and Analysis of Low-Risk Portfolios Based on Stock Correlations
BT  - Proceedings of the 2025 4th International Conference on Bigdata Blockchain and Economy Management (ICBBEM 2025)
PB  - Atlantis Press
SP  - 126
EP  - 131
SN  - 1951-6851
UR  - https://doi.org/10.2991/978-94-6463-742-7_15
DO  - 10.2991/978-94-6463-742-7_15
ID  - Wang2025
ER  -