When　extreme　events　happen　in　the　world,　the　correlation　risk　among　assets　rises　outstandingly.　So　how　to　prevent　and　hedge　the　correlation　risk　in　advance　becomes　an　important　subject　for　financial　risk　management　and　emergency　management.　Indeed,　the　volatility　of　index　is　influenced　by　the　market　liquidity,　stock　volatility　and　the　correlation　coefficient　among　stocks,　while　the　stock　volatility　is　not　influenced　by　the　correlation　coefficient.　Therefore,　when　the　extreme　events　happen,　the　volatility　of　index　will　increase　significantly　because　of　the　increasing　correlation　coefficient　among　assets.　As　a　result,　the　price　of　index　option　will　increase　substantially.　While　the　price　of　stock　option　is　only　influenced　by　the　stock　volatility　and　is　irrelevant　to　the　correlation　coefficient,　then　the　difference　between　stock　index　option　price　and　the　price　of　stock　options　contains　the　＇correlation　risk　premium＇.　Therefore,　in　theory,　the　index　option　can　be　used　to　hedge　the　correlation　risk　because　the　index　option　price　contains　the　＇correlation　risk　premium＇.　Finally,　in　order　to　establish　a　trading　strategy　to　hedge　the　correlation　risk　among　stocks,　we　compare　the　index　volatility　risk　and　the　stock　volatility　risk,　strip　out　the　correlation　risk　among　stocks,　and　then　hedge　the　correlation　risk.　In　this　paper,　we　use　the　Hang　Seng　Index　option　and　its　component　stocks　for　empirical　research.　The　date　ranges　from　March　1,　2007　to　August　31,　2011.　The　empirical　result　shows　that　when　the　extreme　events　happen,　the　correlation　risk　among　the　Hang　Seng　Index　stocks　increases　significantly.　The　correlation　trading　strategy　built　in　this　paper　can　be　used　to　hedge　the　correlation　risk　among　stocks　in　the　portfolio　and　it　makes　a　contribution　to　control　and　prevent　the　correlation　risk　among　stocks　in　advance,　and　gives　investors　a　certain　amount　of　revenue.　©,　2015,　Systems　Engineering　Society　of　China.　All　right　reserved.