How to apply Principle Component Analysis on financial ratios to reduce dimensions.

Hello,

I have data set of financial ratios for 5 different companies during 5 years period. I will do another anaysis with the ratios but before that I want to extract the most important ratios to avoid uncessary variables in my future analysis. In order to do that I want to apply PCA into my data set but I am having trouble about preparing my dataset to apply PCA. I am noobie in matlab and also in statictics but I am working too hard to improve my skills. I would be glad if you can give me an advice where to start/how to start.

thanks in advance

[Adam]

doc pca

is the best place to start, if you have the Statistics toolbox, including any links it takes you to with examples, e.g. the 'Topics' at the bottom.

Answer 1

[Vimal Rathod]

Hi,

You can check the documentation on “pca function” from MATLAB statistics toolbox and you just need to have raw numerical data to be passed into pca.

Refer to the following link for pca documentation:

https://www.mathworks.com/help/stats/pca.html

Refer to the following link for more information on dimensionality reduction:

https://www.mathworks.com/help/stats/dimensionality-reduction.html?s_tid=CRUX_lftnav