This module allows you to analyze existing cross correlation between ISEQ and IBEX 35. You can compare the effects of market volatilities on ISEQ and IBEX 35 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 IBEX 35. See also your portfolio center. Please also check ongoing floating volatility patterns of ISEQ and IBEX 35.
Assuming 30 trading days horizon, ISEQ is expected to under-perform the IBEX 35. But the index apears to be less risky and, when comparing its historical volatility, ISEQ is 1.08 times less risky than IBEX 35. The index trades about -0.04 of its potential returns per unit of risk. The IBEX 35 is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 985,100 in IBEX 35 on June 15, 2018 and sell it today you would lose (11,620) from holding IBEX 35 or give up 1.18% of portfolio value over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding ISEQ and IBEX 35 in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on IBEX 35 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 IBEX 35. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBEX 35 has no effect on the direction of ISEQ i.e. ISEQ and IBEX 35 go up and down completely randomly.
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