Allowing for the 30-days total investment horizon, Facebook is expected to generate 1.74 times more return on investment than DOW. However, Facebook is 1.74 times more volatile than DOW. It trades about 0.34 of its potential returns per unit of risk. DOW is currently generating about -0.05 per unit of risk. If you would invest 18,690 in Facebook on May 23, 2018 and sell it today you would earn a total of 1,505 from holding Facebook or generate 8.05% return on investment over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding Facebook Inc and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW and Facebook 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 Facebook are associated (or correlated) with DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of Facebook i.e. Facebook and DOW go up and down completely randomly.
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