Correlation network

March 22, 2011
By

(This article was first published on Quantitative thoughts » EN, and kindly contributed to R-bloggers)

I came up with an idea to draw correlation network to get a grasp about relationship between a list of stocks. An alternative way to show correlation matrix would be head map, which can have limitations with big matrices (>100).
Unfortunately,  ggplot2 package doesn’t have a easy way to draw the networks, so I was left with igraph or network. I tried both, but somehow chose igraph. If you want to master either package I highly recommend to start from theoretical part – it is very well written and it will save your time trying to understand the package’s conception.

Here is correlation matrix of stocks, which correlation coef. is more than 0.5:
correlation_network

?View Code RSPLUS
require(xts)
require(quantmod)
require(igraph)
cor_mat<- matrix( runif(100), nr=10 )
cor_mat[ lower.tri(cor_mat, diag=TRUE) ]<- 0
cor_mat[ abs(cor_mat) < 0.5]<- 0
 
graph <- graph.adjacency(cor_mat>0.5, weighted=TRUE, mode="upper")
E(graph)$weight<-t(cor_mat)[abs(t(cor_mat))>0.5]
E(graph)[ weight>0.7 ]$color <- "black" E(graph)[ weight>=0.65 &amp; weight<0.7 ]$color <- "red" E(graph)[ weight>=0.6 &amp;weight<0.65 ]$color <- "green" E(graph)[ weight>=0.55 &amp;weight<0.6 ]$color <- "blue"
E(graph)[ weight<0.55  ]$color <- "yellow"
V(graph)$label<- seq(1:10)#V(graph)$name
graph$layout <- layout.fruchterman.reingold
factor<-as.factor(cut(E(graph)$weight*10,c(4,5,6,7,8),labels=c(1,10,20,30))) png('corr_network.png',width=500) plot(decompose.graph(graph)[[which.max(sapply(decompose.graph(graph), vcount))]],edge.width =as.numeric(factor)*1.5,frame=T) legend("bottomleft", title="Colors", cex=0.75, pch=16, col=c("black", "blue","red", "green","pink"), legend=c(">70%", "65-70","60-65","55-60","50-55"), ncol=2)
dev.off()

The code can be found on github.

To leave a comment for the author, please follow the link and comment on their blog: Quantitative thoughts » EN.

R-bloggers.com offers daily e-mail updates about R news and tutorials on topics such as: Data science, Big Data, R jobs, visualization (ggplot2, Boxplots, maps, animation), programming (RStudio, Sweave, LaTeX, SQL, Eclipse, git, hadoop, Web Scraping) statistics (regression, PCA, time series, trading) and more...



If you got this far, why not subscribe for updates from the site? Choose your flavor: e-mail, twitter, RSS, or facebook...

Tags: , , , , , , ,

Comments are closed.

Sponsors

Mango solutions



RStudio homepage



Zero Inflated Models and Generalized Linear Mixed Models with R

Dommino data lab

Quantide: statistical consulting and training



http://www.eoda.de







ODSC

ODSC

CRC R books series





Six Sigma Online Training





Contact us if you wish to help support R-bloggers, and place your banner here.

Never miss an update!
Subscribe to R-bloggers to receive
e-mails with the latest R posts.
(You will not see this message again.)

Click here to close (This popup will not appear again)