DHRP_Portfolio {HierPortfolios} | R Documentation |
Performs the Constrained Hierarchical Risk Parity portfolio strategy proposed by Pfitzinger and Katzke (2019).
DHRP_Portfolio(covar, graph = FALSE, tau = 1, UB = NULL, LB = NULL)
covar |
Covariance matrix of returns. The covariance matrix will be transformed into correlation matrix and then into a distance matrix. |
graph |
To plot de dendrogram set this value to TRUE. By default this value is equal to FALSE. |
tau |
Parameter to evaluate asset similarity at the cluster edges. Default value is 1. |
UB |
Upper bound for weights. By default this value is equal to NULL |
LB |
Lower bound for weights. By default this value is equal to NULL |
portfolio weights
Carlos Trucios and Moon Jun Kwon
Pfitzinger, J., and Katzke, N. A constrained hierarchical risk parity algorithm with cluster-based capital allocation (2019). Working Paper.
HCAA_Portfolio
, HRP_Portfolio
and HERC_Portfolio
covar <- cov(mldp_returns)
DHRP_Portfolio(covar)