BIS Trade Weighted Indices Clusters

I have always been keen on clustering methods as they are a practical way to visualise meaningful relationships that may exist in the somehow chaotic financial markets….. I thought that I would apply such methodology to the trade weighted indices published by the BIS. Obviously this could easily be used within other context such as multi-asset, macro-fundamentals etc….if you want a natter about this or just to exchange some ideas on the subject, contact me at

The following charts look how the monthly changes in the Trade weighted indices have correlated since January 2000.

plot of chunk correlation

The below plot the minimum spanning tree for the TWI indices. The distance between the nodes being a function of the above correlations. Some groupings are quite intuitive…some other less so…My R script uses  visNetwork to provide a dynamic chart that can be manipulated…I will add further controls such as Zoom later…