Clustering Shariah-Compliant Stocks In The Construction Sector On Bursa Malaysia

Abstract

The complexity and volatility of stocks have made it difficult for investors to screen ethical and profitable options. Finding the ideal portfolio requires navigation through market uncertainties, fluctuations and fundamentals. Hence, this paper explores strategies to develop a risk-category portfolio to suit investors while adhering to Shariah guidelines. The main goals are to determine distinct clusters of Shariah-compliant stocks for construction companies in Bursa Malaysia and to categorize the cluster of stocks using selected stock indicators. K-Means Cluster analysis was employed to segment the construction stocks. Data on indicators were assessed from a finance portal from 2022 to 2024. The findings revealed three different clusters. Cluster 1 has the highest stock price and market capitalization, making it the most stable and lucrative option for long-term investors. Cluster 2, which exhibited moderate risk investment, is ideal for investors prioritizing capital preservation. Cluster 3, with 56 stocks, displayed high volatility and lower prices, appealing to risk-tolerant investors seeking growth opportunities. Based on these findings, the study aims to support investors in making informed, ethical, and strategically sound decisions in line with Shariah principles.