This module allows you to analyze existing cross correlation between DOW and Apple. You can compare the effects of market volatilities on DOW and Apple 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 Apple. See also your portfolio center. Please also check ongoing floating volatility patterns of DOW and Apple.
Given the investment horizon of 30 days, DOW is expected to generate 0.25 times more return on investment than Apple. However, DOW is 4.01 times less risky than Apple. It trades about 0.43 of its potential returns per unit of risk. Apple is currently generating about 0.03 per unit of risk. If you would invest 2,565,698 in DOW on August 23, 2018 and sell it today you would earn a total of 108,652 from holding DOW or generate 4.23% return on investment over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding DOW and Apple Inc in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Apple 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple has no effect on the direction of DOW i.e. DOW and Apple go up and down completely randomly.
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