This module allows you to analyze existing cross correlation between Russell 2000 and NIKKEI 225. You can compare the effects of market volatilities on Russell 2000 and NIKKEI 225 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 Russell 2000 with a short position of NIKKEI 225. See also your portfolio center. Please also check ongoing floating volatility patterns of Russell 2000 and NIKKEI 225.
Given the investment horizon of 30 days, Russell 2000 is expected to under-perform the NIKKEI 225. But the index apears to be less risky and, when comparing its historical volatility, Russell 2000 is 1.07 times less risky than NIKKEI 225. The index trades about -0.42 of its potential returns per unit of risk. The NIKKEI 225 is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest 2,358,627 in NIKKEI 225 on September 20, 2018 and sell it today you would lose (105,419) from holding NIKKEI 225 or give up 4.47% of portfolio value over 30 days.
Pair Corralation between Russell 2000 and NIKKEI 225
Overlapping area represents the amount of risk that can be diversified away by holding Russell 2000 and NIKKEI 225 in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on NIKKEI 225 and Russell 2000 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 Russell 2000 are associated (or correlated) with NIKKEI 225. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIKKEI 225 has no effect on the direction of Russell 2000 i.e. Russell 2000 and NIKKEI 225 go up and down completely randomly.
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