Analysis of the Investment Features of Stocks of Valuation System with Chinese Characteristics Based on Hierarchical Cluster Method

Abstract

The ultimate goal of stock investment is to achieve profitability, and risk avoidance is the most important foundation for achieving profitability. Accurately evaluating the value of stocks in the market is one of the key factors for successful investment. Under the background of proposing the Valuation System with Chinese Characteristics, a reasonable analysis of the investment features of stocks of Valuation System with Chinese Characteristics can bring opportunities to investors. To this end, first construct the characteristic indices of stocks of Valuation System with Chinese Characteristics — Price Earnings Ratio (PE), Price-to-Book Ratio (PB), and Dividend Yield Ratio. Then, based on the characteristic indices, use the hierarchical cluster method to perform clustering analysis on the stocks of Valuation System with Chinese Characteristics. Afterwards, by optimizing the clustering results, all stocks of Valuation System with Chinese Characteristics were classified into four categories. According to the classification analysis of the investment features of the stocks, it can be concluded that the issuing company of the first category of stocks has recently been operating poorly, so it is not recommended to invest; The value of stocks in the second category is overestimated and it is not recommended to invest; The third category of stocks are high growth stocks, and it is recommended to invest with caution; The stocks in the fourth category have the characteristics of undervaluation and high dividends, and it is recommended to invest.