HRP_Portfolio {HierPortfolios} | R Documentation |
Hierarchical Risk Parity
Description
Performs the Hierarchical Risk Parity portfolio proposed strategy by De Prado (2016). Several linkage methods for the hierarchical clustering can be used, by default the "single" linkage is used.
Usage
HRP_Portfolio(covar, linkage = "single", graph = FALSE)
Arguments
covar |
Covariance matrix of returns. The covariance matrix will be transformed into correlation matrix and then into a distance matrix. |
linkage |
Linkage method used in the hierarchical clustering. Allowed options are "single", "complete", "average" or "ward". Default option is "single". |
graph |
To plot de dendrogram set this value to TRUE. By default this value is equal to FALSE. |
Value
portfolio weights
Author(s)
Carlos Trucios
References
De Prado, Marcos Lopez. "Building diversified portfolios that outperform out of sample." The Journal of Portfolio Management 42.4 (2016): 59-69.
See Also
HCAA_Portfolio
, HERC_Portfolio
and DHRP_Portfolio
Examples
covar <- cov(mldp_returns)
HRP_Portfolio(covar)