Correlation Analysis Between Hang Seng and Russell 2000

Overlapping area represents the amount of risk that can be diversified away by holding Hang Seng and Russell 2000 in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Russell 2000 and Hang Seng 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 Hang Seng are associated (or correlated) with Russell 2000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell 2000 has no effect on the direction of Hang Seng i.e. Hang Seng and Russell 2000 go up and down completely randomly.