Use of sparse correlations for assessing financial markets

1 Introduction In the financial market,the partial correlation is a technical tool for studying the relationships between stocks,pairs trading,and industry classification[1,2].Many of these studies[2-4]focus on traditional statistical methods,which solve the partial correlation of stocks with a large number of observation samples and a relatively small number of stocks.For example,Jung and Chang[2]used 10 years of daily-level data to calculate the partial correlation matrix of 300 stocks.