This module allows you to analyze existing cross correlation between S&P 500 and Bovespa. You can compare the effects of market volatilities on SP 500 and Bovespa 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 SP 500 with a short position of Bovespa. See also your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Bovespa.
Assuming 30 trading days horizon, S&P 500 is expected to under-perform the Bovespa. But the index apears to be less risky and, when comparing its historical volatility, S&P 500 is 1.17 times less risky than Bovespa. The index trades about -0.03 of its potential returns per unit of risk. The Bovespa is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 8,384,713 in Bovespa on October 18, 2018 and sell it today you would earn a total of 466,787 from holding Bovespa or generate 5.57% return on investment over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding S&P 500 and Bovespa in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Bovespa and SP 500 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 S&P 500 are associated (or correlated) with Bovespa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bovespa has no effect on the direction of SP 500 i.e. SP 500 and Bovespa go up and down completely randomly.
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