Utilizing Technical Data to Discover Similar Companies in Dhaka Stock Exchange

Paper: arXiv 2301.04455

Authors: Tashreef Muhammad, Tahsin Aziz, Mohammad Shafiul Alam

Abstract

Stock market investment have been an ideal form of investment for many years. Investing capitals smartly in stock market yields high profit returns. But there are many companies available in a market. Currently there are more than $345$ active companies who have stocks in Dhaka Stock Exchange (DSE). Analyzing all these companies is quite impossible. However, many companies tend to move together. This study aims at finding which companies in DSE have a close connection and move alongside each other. By analyzing this relation, the investors and traders will be able to analyze a lot of companies’ statistics from a calculating just a handful number of companies. The conducted experiment yielded promising results. It was found that though the system was not given anything other than technical data, it was able to identify companies that show domain specific outcomes. In other words, a relation between technical data and fundamental data was discovered from the conducted experiment.

Complexity vs Empirical Score

• Math Complexity: 3.0/10
• Empirical Rigor: 4.5/10
• Quadrant: Philosophers — conceptual discussion, limited math and data

Why this score: The paper attempts to use technical time-series data to cluster similar stocks in an emerging market (Dhaka Stock Exchange), but relies on basic grouping methodology with limited mathematical depth. The empirical analysis is exploratory and lacks rigorous statistical testing or out-of-sample backtesting of actionable trading signals.

Research Flowchart

  flowchart TD
    A[Research Goal: Find co-moving companies in DSE to simplify market analysis] --> B[(Data Input: Technical stock data of DSE companies)]
    B --> C[Data Preprocessing & Technical Feature Extraction]
    C --> D[Clustering & Correlation Analysis]
    D --> E[Key Finding: Technical data clusters align with domain-specific fundamental sector behavior]
    E --> F[Outcome: Investors analyze market trends using a smaller representative subset of stocks]