I'm diving into financial mathematics and have calculated a matrix that gives me the daily change of four given securities:
The start of it looks like this:
My Tutorial is now calculating the covariance of a stock over a year as $250\ Cov(d_1, d_2)$, where $d_x$ is the daily change of a stock.
250 is the number of trading days on my stock exchange.
So, for example, the iROB and DAX have a daily Covariance of $Cov(iROB, DAX) = -0.000173$ and therefore a yearly one of $250\ Cov(iROB, DAX) = -0.043201$.
This feels to me like comparing apples and oranges. Why can I scale the covariance up by a factor of days in order to get the yearly Covariance?