This module allows you to analyze existing cross correlation between Madrid Gnrl and Jakarta Comp. You can compare the effects of market volatilities on Madrid Gnrl and Jakarta Comp 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 Madrid Gnrl with a short position of Jakarta Comp. See also your portfolio center. Please also check ongoing floating volatility patterns of Madrid Gnrl and Jakarta Comp.
Assuming 30 trading days horizon, Madrid Gnrl is expected to under-perform the Jakarta Comp. But the index apears to be less risky and, when comparing its historical volatility, Madrid Gnrl is 1.5 times less risky than Jakarta Comp. The index trades about -0.02 of its potential returns per unit of risk. The Jakarta Comp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 588,404 in Jakarta Comp on June 17, 2018 and sell it today you would lose (2,253) from holding Jakarta Comp or give up 0.38% of portfolio value over 30 days.
Pair Corralation between Madrid Gnrl and Jakarta Comp
Overlapping area represents the amount of risk that can be diversified away by holding Madrid Gnrl and Jakarta Comp in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Jakarta Comp and Madrid Gnrl 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 Madrid Gnrl are associated (or correlated) with Jakarta Comp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jakarta Comp has no effect on the direction of Madrid Gnrl i.e. Madrid Gnrl and Jakarta Comp go up and down completely randomly.
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