- S1,S2,...,S10: the securities that construct the portfolio. Proper values could be any security (e.g., EURUSD, GBPUSD, USDJPY, AUDUSD, AUDJPY, USDCAD, DAX30, DJ30, S&P500,WTI, GOLD, ...). The default value is NA which means that no security is added to the portfolio.
- W1,W2,...,W10: the weights of the securities in the portfolio. Proper values could be any real number. A positive number means that we are long a security. A negative number means that we are short. Note that the weights of the denominators cannot be 0.0.
Indicator=W1*S1/W2*S2 + W3*S3/W4*S4 +...+W9*S9/W10*S10
Timeframe: The index is constructed using the closing price of each candle and the same timeframe of the chart that is attached to.
Literally, you may plot any combination of securities you would like to investigate further.
You may plot:
- # Gold/Oil
- # USDCAD + Oil Futures
- # 0.4 EURUSD - 0.2 USDJPY - 0.8 AUDUSD + 0.2 Gold
- # 0.4 Oil/EURUSD + 0.6 S&P500 + 0.3 Nikkey225
The goal of fund managers, is to construct a portfolio that has the minimum possible variability and is growing with time. The indicator we are publishing gives you the oportunity to commit any trial you want in order to achieve this goal. So that your efforts are assisted, you are also advised to buy our Correlation Index indicator that calculates the correlation between two securities. Theory suggests to add any security to your portfolio that has a low correlation with the portfolio.
Example: Plotting USDCAD+Oil
W2=1.0 (Attention: that is the denominator of the first part of the equation)
S2=NA (Attention: that is the denominator of the first part of the equation)
... the rest of parameters are left with their default number
(i.e. W4=W6=W8=W10=1.0, S4=S5=..=S10=NA, W5=W7=W9=0.0)