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In the graph below you can see an irregular Cash Flow.

The graph is cumulative, on the y axes there are moneys, on the x the dates.

enter image description here

In the second graph the IRR (calculated from the beginning to the last day x). I was expecting the IRR to be correlated to the discrete derivative of the first graph, but I was wrong.

Can you help me to understand the relationship between the two curves?

enter image description here

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  • $\begingroup$ What happened to this comment: "How do you compute IRR? To me IRR is $\frac{W(t)}{W(0)}-1$ which will look similar to your graph " $\endgroup$ – Revious Aug 29 '20 at 16:35
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As you have series of dates the XIRR should be applied. I suppose you did so. In regard to the graphs correlation. The longer the period and the larger the amount of data, the more the same behavior of the graphs should be. Seems the graph does not present all cash flows/period, the beginning part I mean. Relatively high fluctuations, jumps, in a daily cash flow data will cause a difference between graphs on that dates. The IRR will react less. It could be observed from the graph attached for the shorter period. I am sure, there is a formula could be found for calculating of relationship and deviation value.

Correlation, jumps

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