ETF Correlation Analysis

In portfolio theory, one of the important aspects of effective portfolio building is using uncorrelated, or less correlated in reality, assets. On the other hand, since cost is one of the investment fundamental principles, index fund as well as low cost ETF are then of the main vehicles to create an efficient portfolio. In this project, we are going to look through ETFs available in Hong Kong stock market, and try to find out the correlation coefficients of different combinations of ETFs. The target is to look for several ETFs with low correlation coefficients that set the basis when creating a practical assets mix. Certainly, further analysis on other factors such as transaction volume is needed when we need to give viable suggestions, which is out of the scope of this project.

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Leo Mak
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