Hi all
I have a trial about hedging 3 currency pairs, for example, there exist 3 orders at the same time with the same volume: selling EURUSD, buying EURJPY, selling USDJPY. Theoretically, with hedging in 3 pairs, Equity will not have much change compared to the time immediately after placing the order. However, after a period of observation, I found that Equity is not only unstable but also very volatile and has an almost complete correlation with the fluctuation of USDJPY pair. Do you have a deep understanding of this issue to explain to me why such a phenomenon happened ???
Here is an example of the above fluctuation when hedging 3 pairs of EU, EJ and UJ as I said above (Red line is balace, blue line is historical Equity fluctuation):
