This module allows you to analyze existing cross correlation between NZSE and NQFI. You can compare the effects of market volatilities on NZSE and NQFI 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 NZSE with a short position of NQFI. See also your portfolio center. Please also check ongoing floating volatility patterns of NZSE and NQFI.
Assuming 30 trading days horizon, NZSE is expected to generate 4.65 times less return on investment than NQFI. But when comparing it to its historical volatility, NZSE is 2.03 times less risky than NQFI. It trades about 0.06 of its potential returns per unit of risk. NQFI is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 159,333 in NQFI on June 19, 2018 and sell it today you would earn a total of 4,413 from holding NQFI or generate 2.77% return on investment over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding NZSE and NQFI in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on NQFI and NZSE 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 NZSE are associated (or correlated) with NQFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NQFI has no effect on the direction of NZSE i.e. NZSE and NQFI go up and down completely randomly.
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