Correlation Between HNX 30 and HVC Investment

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

By analyzing existing cross correlation between HNX 30 and HVC Investment and, you can compare the effects of market volatilities on HNX 30 and HVC Investment 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 HVC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of HNX 30 and HVC Investment.

Diversification Opportunities for HNX 30 and HVC Investment

0.22

Correlation Coefficient

HNX 30  HVC Investment

Modest diversification

The 3 months correlation between HNX and HVC is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding HNX 30 and HVC Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HVC Investment 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 HVC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HVC Investment has no effect on the direction of HNX 30 i.e., HNX 30 and HVC Investment go up and down completely randomly.

Pair Corralation between HNX 30 and HVC Investment

Assuming the 90 days trading horizon HNX 30 is expected to generate 3.9 times less return on investment than HVC Investment. But when comparing it to its historical volatility, HNX 30 is 2.85 times less risky than HVC Investment. It trades about 0.11 of its potential returns per unit of risk. HVC Investment and is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  961,000  in HVC Investment and on December 28, 2024 and sell it today you would earn a total of  224,000  from holding HVC Investment and or generate 23.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	77.59%
Values	Daily Returns

HNX 30  vs.  HVC Investment and

Pair Trading with HNX 30 and HVC Investment

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

The idea behind HNX 30 and HVC Investment and 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.