Correlation Between Ameren Corp and Hawaiian Electric

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

By analyzing existing cross correlation between Ameren Corp and Hawaiian Electric Industries, you can compare the effects of market volatilities on Ameren Corp and Hawaiian Electric 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 Ameren Corp with a short position of Hawaiian Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameren Corp and Hawaiian Electric.

Diversification Opportunities for Ameren Corp and Hawaiian Electric

-0.41

Correlation Coefficient

Ameren Corp  Hawaiian Electric

Very good diversification

The 3 months correlation between Ameren and Hawaiian is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ameren Corp and Hawaiian Electric Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Electric and Ameren Corp 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 Ameren Corp are associated (or correlated) with Hawaiian Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawaiian Electric has no effect on the direction of Ameren Corp i.e., Ameren Corp and Hawaiian Electric go up and down completely randomly.

Pair Corralation between Ameren Corp and Hawaiian Electric

Considering the 90-day investment horizon Ameren Corp is expected to generate 0.33 times more return on investment than Hawaiian Electric. However, Ameren Corp is 3.02 times less risky than Hawaiian Electric. It trades about 0.22 of its potential returns per unit of risk. Hawaiian Electric Industries is currently generating about 0.01 per unit of risk. If you would invest  8,186  in Ameren Corp on August 30, 2024 and sell it today you would earn a total of  1,312  from holding Ameren Corp or generate 16.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ameren Corp  vs.  Hawaiian Electric Industries

Ameren Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ameren Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Ameren Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hawaiian Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hawaiian Electric Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Hawaiian Electric is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ameren Corp and Hawaiian Electric

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

The idea behind Ameren Corp and Hawaiian Electric Industries 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.