Correlation Between HNX 30 and EVN Finance

Can any of the company-specific risk be diversified away by investing in both HNX 30 and EVN Finance 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 HNX 30 and EVN Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HNX 30 and EVN Finance JSC, you can compare the effects of market volatilities on HNX 30 and EVN Finance 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 HNX 30 with a short position of EVN Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of HNX 30 and EVN Finance.

Diversification Opportunities for HNX 30 and EVN Finance

0.57

Correlation Coefficient

HNX 30  EVN Finance

Very weak diversification

The 3 months correlation between HNX and EVN is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding HNX 30 and EVN Finance JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVN Finance JSC and HNX 30 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 HNX 30 are associated (or correlated) with EVN Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVN Finance JSC has no effect on the direction of HNX 30 i.e., HNX 30 and EVN Finance go up and down completely randomly.

Pair Corralation between HNX 30 and EVN Finance

Assuming the 90 days trading horizon HNX 30 is expected to generate 0.42 times more return on investment than EVN Finance. However, HNX 30 is 2.38 times less risky than EVN Finance. It trades about -0.09 of its potential returns per unit of risk. EVN Finance JSC is currently generating about -0.11 per unit of risk. If you would invest  48,271  in HNX 30 on October 25, 2024 and sell it today you would lose (2,370) from holding HNX 30 or give up 4.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

HNX 30  vs.  EVN Finance JSC

Pair Trading with HNX 30 and EVN Finance

The main advantage of trading using opposite HNX 30 and EVN Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HNX 30 position performs unexpectedly, EVN Finance 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 EVN Finance will offset losses from the drop in EVN Finance's long position.

The idea behind HNX 30 and EVN Finance JSC 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.