This module allows you to analyze existing cross correlation between ISEQ and CAC 40. You can compare the effects of market volatilities on ISEQ and CAC 40 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 ISEQ with a short position of CAC 40. See also your portfolio center. Please also check ongoing floating volatility patterns of ISEQ and CAC 40.
Assuming 30 trading days horizon, ISEQ is expected to under-perform the CAC 40. In addition to that, ISEQ is 1.31 times more volatile than CAC 40. It trades about -0.16 of its total potential returns per unit of risk. CAC 40 is currently generating about -0.11 per unit of volatility. If you would invest 517,305 in CAC 40 on October 17, 2018 and sell it today you would lose (13,943) from holding CAC 40 or give up 2.7% of portfolio value over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding ISEQ and CAC 40 in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on CAC 40 and ISEQ 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 ISEQ are associated (or correlated) with CAC 40. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAC 40 has no effect on the direction of ISEQ i.e. ISEQ and CAC 40 go up and down completely randomly.
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