okay let me explain the spreadsheet better. I was comparing investments in an irrelevant market, to investments in a relevant market. Each investment has a 1⁄3 chance of growing 0%, a 1⁄3 chance of growing 5%, and a 1⁄3 chance of growing 10%. The top spreadsheet shows the value of your money if you invest it in an irrelevant market. The bottom spreadsheet shows the value of your money if you invest it in a relevant market. For instance if you invest in a relevant market and the relevant market doesn’t change, then you get 0% on your investments and 0% change in donation value so your donations are worth 100% what they were worth before. If you invest in an irrelevant market, and both markets go up by 5%, then your donations would be worth 1 1.05 1.05 = 110.25 % if the covariance is 100%, but here the covariance is 40% so the calculation is 1 1.05 1.02 = 107.10%. Both numbers on the right are the average of the nine grid squares to the left, so they are the expected value of your investment after one year.
It’s really really simplistic math but I just tried to get a sense of the scale of the effect, it turned out to be small.
okay let me explain the spreadsheet better. I was comparing investments in an irrelevant market, to investments in a relevant market. Each investment has a 1⁄3 chance of growing 0%, a 1⁄3 chance of growing 5%, and a 1⁄3 chance of growing 10%. The top spreadsheet shows the value of your money if you invest it in an irrelevant market. The bottom spreadsheet shows the value of your money if you invest it in a relevant market. For instance if you invest in a relevant market and the relevant market doesn’t change, then you get 0% on your investments and 0% change in donation value so your donations are worth 100% what they were worth before. If you invest in an irrelevant market, and both markets go up by 5%, then your donations would be worth 1 1.05 1.05 = 110.25 % if the covariance is 100%, but here the covariance is 40% so the calculation is 1 1.05 1.02 = 107.10%. Both numbers on the right are the average of the nine grid squares to the left, so they are the expected value of your investment after one year.
It’s really really simplistic math but I just tried to get a sense of the scale of the effect, it turned out to be small.