No risk reduction
Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Wtd and Jakarta Comp in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Jakarta Comp and Taiwan Wtd 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 Taiwan Wtd 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 Taiwan Wtd i.e. Taiwan Wtd and Jakarta Comp go up and down completely randomly.