Very weak diversification
Overlapping area represents the amount of risk that can be diversified away by holding MerVal and XU100 in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on XU100 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 XU100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XU100 has no effect on the direction of MerVal i.e. MerVal and XU100 go up and down completely randomly.