This module allows you to analyze existing cross correlation between Taiwan Wtd and MerVal. You can compare the effects of market volatilities on Taiwan Wtd and MerVal 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 Taiwan Wtd with a short position of MerVal. See also your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Wtd and MerVal.
Assuming 30 trading days horizon, Taiwan Wtd is expected to generate 0.23 times more return on investment than MerVal. However, Taiwan Wtd is 4.26 times less risky than MerVal. It trades about 0.02 of its potential returns per unit of risk. MerVal is currently generating about -0.1 per unit of risk. If you would invest 1,089,928 in Taiwan Wtd on June 22, 2018 and sell it today you would earn a total of 3,283 from holding Taiwan Wtd or generate 0.3% return on investment over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Wtd and MerVal in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on MerVal 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 MerVal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MerVal has no effect on the direction of Taiwan Wtd i.e. Taiwan Wtd and MerVal go up and down completely randomly.
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