Clustering and Trading of FX Currency Pairs

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Other Title
  • FX通貨ペアのクラスタリングとトレーディング
  • FX ツウカ ペア ノ クラスタリング ト トレーディング
Published
2007-11
Resource Type
departmental bulletin paper
Publisher
九州産業大学経営学会

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Description

This paper treats the risk control in the FX investment. The risk hedge strategy by the diversified investment is proposed by using cluster analysis and canonical correlation analysis as a technique for this. Cluster analysis showed that eight currency pairs were divided into two clusters. Next, canonical correlation analysis outputted two structural coefficient vectors by this. The direction (long position/short position) of the trade which hedge risk is proposed by the structural coefficient vector. Information on fundamental analysis and technical analysis is used for the set of the trade, too. Trade was done under low leverage of about three times based on the swing trade. The speed of evening up was fast, and it could get the gross profit and loss of buying and selling of about 210,000yen in a week. It seems that the performance of about 68% of the annual rates can be expected by this.

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