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PYTHON CODE: Co-Movement Analysis | Normality vs. 2008 Credit Crisis vs. 2020 Coronavirus Pandemic

In Crisis Events- correlation becomes highly positive i.e., it spikes during Crisis (sometimes almost close to +1 but not +1) not only between individual securities but also between different asset classes and risk types. That does not mean that we should ignore diversifying our portfolio as it protects from being exposed to unsystematic risk which can be country-specific or company-specific. Even in coronavirus and credit crisis, I observed that correlation is not perfectly positive across Global Indices. Of course, it will reduce the risk - not eliminate the risk.


 

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