Predicting Portfolios Using Fuzzy Logic And Optimization Techniques: A Case Study Of BSE-IT Listed Companies

Abstract

Stock price trends were considered in this study, the companies in the BSE-IT index, with a view to optimizing portfolio allocation based on risk tolerance. The GARCH model has been applied here to allow an investigation into the volatility of the stock returns and to set up different clusters using K-Means clustering that group together companies owning the same attributes related to volatility for strategic classification. Data collection and processing occur between April 1, 2014, and March 31, 2024, for reasons of reliability and relevance. Descriptive statistics report on the variance of stock performance across companies; different risk-return profiles are thus exposed. The GARCH model measures each stock's long-term variance, along with sensitivity to past shocks, and overall volatility persistence, making this an excellent inventory for risk assessment. K-Means clustering groups companies based on similar volatility patterns, thereby informing portfolio construction. Findings present how clustering with econometric modeling may assist in the production of optimal portfolios that depend on specified risk capacities, thus efficiently managing and implementing an IT investment strategy.