This module allows you to analyze existing cross correlation between MerVal and Shanghai. You can compare the effects of market volatilities on MerVal and Shanghai 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 MerVal with a short position of Shanghai. See also your portfolio center. Please also check ongoing floating volatility patterns of MerVal and Shanghai.
Assuming 30 trading days horizon, MerVal is expected to under-perform the Shanghai. In addition to that, MerVal is 3.77 times more volatile than Shanghai. It trades about -0.01 of its total potential returns per unit of risk. Shanghai is currently generating about 0.04 per unit of volatility. If you would invest 312,893 in Shanghai on April 24, 2018 and sell it today you would earn a total of 2,572 from holding Shanghai or generate 0.82% return on investment over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding MerVal and Shanghai in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Shanghai and MerVal 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 MerVal are associated (or correlated) with Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai has no effect on the direction of MerVal i.e. MerVal and Shanghai go up and down completely randomly.
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