This module allows you to analyze existing cross correlation between SPTSX Comp and Madrid Gnrl. You can compare the effects of market volatilities on SPTSX Comp 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 SPTSX Comp with a short position of Madrid Gnrl. See also your portfolio center. Please also check ongoing floating volatility patterns of SPTSX Comp and Madrid Gnrl.
Assuming 30 trading days horizon, SPTSX Comp is expected to under-perform the Madrid Gnrl. But the index apears to be less risky and, when comparing its historical volatility, SPTSX Comp is 1.06 times less risky than Madrid Gnrl. The index trades about -0.03 of its potential returns per unit of risk. The Madrid Gnrl is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 100,679 in Madrid Gnrl on March 27, 2018 and sell it today you would lose (352.00) from holding Madrid Gnrl or give up 0.35% of portfolio value over 30 days.
Pair Corralation between SPTSX Comp and Madrid Gnrl
Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Comp and Madrid Gnrl in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Madrid Gnrl and SPTSX Comp 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 SPTSX Comp 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 SPTSX Comp i.e. SPTSX Comp and Madrid Gnrl go up and down completely randomly.
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