This module allows you to analyze existing cross correlation between DOW and Taiwan Wtd. You can compare the effects of market volatilities on DOW and Taiwan Wtd and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DOW with a short position of Taiwan Wtd. See also your portfolio center. Please also check ongoing floating volatility patterns of DOW and Taiwan Wtd.
Given the investment horizon of 30 days, DOW is expected to generate 0.96 times more return on investment than Taiwan Wtd. However, DOW is 1.04 times less risky than Taiwan Wtd. It trades about -0.01 of its potential returns per unit of risk. Taiwan Wtd is currently generating about -0.11 per unit of risk. If you would invest 2,509,048 in DOW on June 15, 2018 and sell it today you would lose (7,107) from holding DOW or give up 0.28% of portfolio value over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding DOW and Taiwan Wtd in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Wtd and DOW 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 DOW are associated (or correlated) with Taiwan Wtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Wtd has no effect on the direction of DOW i.e. DOW and Taiwan Wtd go up and down completely randomly.
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