Correlation Between Danang Education and HNX 30

Can any of the company-specific risk be diversified away by investing in both Danang Education and HNX 30 at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Danang Education and HNX 30 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Danang Education Investment and HNX 30, you can compare the effects of market volatilities on Danang Education and HNX 30 and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Danang Education with a short position of HNX 30. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danang Education and HNX 30.

Diversification Opportunities for Danang Education and HNX 30

-0.05

Correlation Coefficient

Danang Education  HNX 30

Good diversification

The 3 months correlation between Danang and HNX is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Danang Education Investment and HNX 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNX 30 and Danang Education is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Danang Education Investment are associated (or correlated) with HNX 30. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNX 30 has no effect on the direction of Danang Education i.e., Danang Education and HNX 30 go up and down completely randomly.

Pair Corralation between Danang Education and HNX 30

Assuming the 90 days trading horizon Danang Education Investment is expected to generate 4.71 times more return on investment than HNX 30. However, Danang Education is 4.71 times more volatile than HNX 30. It trades about 0.02 of its potential returns per unit of risk. HNX 30 is currently generating about -0.07 per unit of risk. If you would invest  2,040,000  in Danang Education Investment on September 20, 2024 and sell it today you would lose (10,000) from holding Danang Education Investment or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.72%
Values	Daily Returns

Danang Education Investment  vs.  HNX 30

Pair Trading with Danang Education and HNX 30

The main advantage of trading using opposite Danang Education and HNX 30 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danang Education position performs unexpectedly, HNX 30 can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HNX 30 will offset losses from the drop in HNX 30's long position.

The idea behind Danang Education Investment and HNX 30 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.