This module allows you to analyze existing cross correlation between DAX and Madrid Gnrl. You can compare the effects of market volatilities on DAX and Madrid Gnrl 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 DAX with a short position of Madrid Gnrl. See also your portfolio center. Please also check ongoing floating volatility patterns of DAX and Madrid Gnrl.
Assuming 30 trading days horizon, DAX is expected to generate 1.67 times more return on investment than Madrid Gnrl. However, DAX is 1.67 times more volatile than Madrid Gnrl. It trades about 0.03 of its potential returns per unit of risk. Madrid Gnrl is currently generating about 0.01 per unit of risk. If you would invest 1,267,797 in DAX on June 19, 2018 and sell it today you would earn a total of 8,797 from holding DAX or generate 0.69% return on investment over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding DAX and Madrid Gnrl in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Madrid Gnrl and DAX 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 DAX are associated (or correlated) with Madrid Gnrl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madrid Gnrl has no effect on the direction of DAX i.e. DAX and Madrid Gnrl go up and down completely randomly.
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