Calculate price variance caused by denominating currency
Calculate price variance caused by denominating currency
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user29630 · External communityPost link
External question — Quantitative Finance Stack Exchange
Author: user29630
Original post: https://quant.stackexchange.com/questions/36054
License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/
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I would like to calculate asset correlations while excluding movements resulting from the denominating currency (as much as possible). My common sense tells me that any two assets with the same denominator are going to have higher correlation, then the underlying securities.
The dollar index, or forex quotes, would only represent foreign exchange
When "all" assets appreciate in value, this could in my view also simultaneously be a devaluation of the base curreny.
For now i just take a mean of log returns from a diverse set of asset classes, but that is an approximation at best.
What would be a good way to calculate this?
Thanks in advance
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FX_NINJA · External communityPost link
External answer — Quantitative Finance Stack Exchange
Author: FX_NINJA
Original post: https://quant.stackexchange.com/a/36062
License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/
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Here is two ideas that comes to mind:
1.)
- Take the derivative of CPI as a % with respect to Wage growth as a %
- Take the derivative of PPI as a % with respect to the derivative ((Composite revenue per share of SP500)/PB ratio)^-1 as a %
2.)
Now find the standard deviation and other relevant descriptive statistics of some weighted index of both ratios.
3.)
Benchmark the derivative of asset X as a % with respect to our measurement index. (choose derivative or difference based on what you are analyzing for)
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Quoted from Forex.com.bd-Editorial External question — Quantitative Finance Stack Exchange Author: user29630 Source score (net votes, not local likes): -1 Original post: https://quant.stackexchange.com/questions/36054 License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I would like to calculate asset correlations while excluding movements resulting from the denominating currency (as much as possible). My common sense tells me that any two assets with the same denominator are going to have higher correlation, then the underlying securities. The dollar index, or forex quotes, would only represent foreign exchange When "all" assets appreciate in value, this could in my view also simultaneously be a devaluation of the base curreny. For now i just take a mean of log returns from a diverse set of asset classes, but that is an approximation at best. What would be a good way to calculate this? Thanks in advance
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