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There is also a big issue with rollover. If you use back adjusted energy
data your index values (and relative proportions) will change significantly
every month, if you use unadjusted, there will be big gaps. Pesky issue. Not
sure how to address without a lot of work.
----- Original Message -----
From: "Gary Fritz" <fritz@xxxxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: Saturday, March 27, 2004 10:58 PM
Subject: Re: From Spread's to indexes
> > i want to create my own index.... and i want to weight the individual
> > components eg
> > heating oil at ummmmmmmm say 40%
> > crude oil at 30%
> > DAX at 30%
>
> Set up HO in Data1, CL in Data2, DAX in Data3.
> Now you could simply combine them by plotting (however you like):
> 0.40*Close of Data1 + 0.30*Close of Data2 + 0.30*Close of Data3
>
> But that doesn't take their widely varying prices into account,
> so e.g. CL (at about $35) will have almost 40x larger impact than
> HO (at about $0.90). So you might want to scale them somehow,
> maybe something like:
>
> { Get recent average value }
> HO = Close of Data1;
> CL = Close of Data2;
> DAX = Close of Data3;
> HOavg = average(HO, 100);
> CLavg = average(CL, 100);
> DAXavg = average(DAX, 100);
> Index = 0.40*(HO/HOavg) + 0.30*(CL/CLavg) + 0.40*(DAX/DAXavg);
>
> ...or whatever calculation suits your fancy.
> Gary
>
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