Correlation Between Telecoms Informatics and HNX

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

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

Diversification Opportunities for Telecoms Informatics and HNX

-0.37

Correlation Coefficient

Telecoms Informatics  HNX

Very good diversification

The 3 months correlation between Telecoms and HNX is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Telecoms Informatics JSC and HNX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNX and Telecoms Informatics 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 Telecoms Informatics JSC are associated (or correlated) with HNX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNX has no effect on the direction of Telecoms Informatics i.e., Telecoms Informatics and HNX go up and down completely randomly.

Pair Corralation between Telecoms Informatics and HNX

Assuming the 90 days trading horizon Telecoms Informatics JSC is expected to generate 3.63 times more return on investment than HNX. However, Telecoms Informatics is 3.63 times more volatile than HNX. It trades about 0.24 of its potential returns per unit of risk. HNX is currently generating about 0.21 per unit of risk. If you would invest  1,270,000  in Telecoms Informatics JSC on September 28, 2024 and sell it today you would earn a total of  135,000  from holding Telecoms Informatics JSC or generate 10.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Telecoms Informatics JSC  vs.  HNX

Pair Trading with Telecoms Informatics and HNX

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

The idea behind Telecoms Informatics JSC and HNX 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.