Correlation Between DTE Energy and Hawaiian Electric

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

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

Diversification Opportunities for DTE Energy and Hawaiian Electric

0.89

Correlation Coefficient

DTE Energy  Hawaiian Electric

Very poor diversification

The 3 months correlation between DTE and Hawaiian is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy and Hawaiian Electric Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Electric and DTE Energy 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 DTE Energy 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 DTE Energy i.e., DTE Energy and Hawaiian Electric go up and down completely randomly.

Pair Corralation between DTE Energy and Hawaiian Electric

Considering the 90-day investment horizon DTE Energy is expected to generate 0.37 times more return on investment than Hawaiian Electric. However, DTE Energy is 2.71 times less risky than Hawaiian Electric. It trades about 0.19 of its potential returns per unit of risk. Hawaiian Electric Industries is currently generating about 0.07 per unit of risk. If you would invest  12,037  in DTE Energy on December 27, 2024 and sell it today you would earn a total of  1,535  from holding DTE Energy or generate 12.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

DTE Energy  vs.  Hawaiian Electric Industries

DTE Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DTE Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, DTE Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hawaiian Electric

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hawaiian Electric Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Hawaiian Electric exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DTE Energy and Hawaiian Electric

The main advantage of trading using opposite DTE Energy and Hawaiian Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DTE Energy 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 DTE Energy 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.