hrp

Subject

Portfolio Construction and Risk

Why This Module Exists

Produces stable allocations without matrix inversion required by classic Markowitz.

Mathematical Foundations

IVP Weight

$w_i\propto\frac{1}{\sigma_i^2}$

Bisection Split

$\alpha=1-\frac{\sigma_{left}^2}{\sigma_{left}^2+\sigma_{right}^2}$

Usage Examples

Rust

Allocate with HRP

use openquant::hrp::HierarchicalRiskParity;

let mut hrp = HierarchicalRiskParity::new();
let weights = hrp.allocate(&prices)?;

API Reference

Rust API

• HierarchicalRiskParity
• HrpDendrogram

Implementation Notes

• HRP is often more robust under unstable covariance estimates.
• Ensure input asset order tracks produced dendrogram order.