Correlation Between HNX 30 and Petrolimex Insurance

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

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

Diversification Opportunities for HNX 30 and Petrolimex Insurance

0.61

Correlation Coefficient

HNX 30  Petrolimex Insurance

Poor diversification

The 3 months correlation between HNX and Petrolimex is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding HNX 30 and Petrolimex Insurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex Insurance Corp 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 Petrolimex Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrolimex Insurance Corp has no effect on the direction of HNX 30 i.e., HNX 30 and Petrolimex Insurance go up and down completely randomly.

Pair Corralation between HNX 30 and Petrolimex Insurance

Assuming the 90 days trading horizon HNX 30 is expected to generate 0.48 times more return on investment than Petrolimex Insurance. However, HNX 30 is 2.07 times less risky than Petrolimex Insurance. It trades about -0.04 of its potential returns per unit of risk. Petrolimex Insurance Corp is currently generating about -0.04 per unit of risk. If you would invest  49,807  in HNX 30 on September 14, 2024 and sell it today you would lose (1,259) from holding HNX 30 or give up 2.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	82.81%
Values	Daily Returns

HNX 30  vs.  Petrolimex Insurance Corp

Pair Trading with HNX 30 and Petrolimex Insurance

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

The idea behind HNX 30 and Petrolimex Insurance Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.