Almost no diversification
Overlapping area represents the amount of risk that can be diversified away by holding All Ords and NIKKEI 225 in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on NIKKEI 225 and All Ords is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on All Ords are associated (or correlated) with NIKKEI 225. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIKKEI 225 has no effect on the direction of All Ords i.e. All Ords and NIKKEI 225 go up and down completely randomly.