Correlation Between Endesa SA and Hawaiian Electric

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

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

Diversification Opportunities for Endesa SA and Hawaiian Electric

0.26

Correlation Coefficient

Endesa SA  Hawaiian Electric

Modest diversification

The 3 months correlation between Endesa and Hawaiian is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Endesa SA ADR and Hawaiian Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Electric and Endesa SA 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 Endesa SA ADR 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 Endesa SA i.e., Endesa SA and Hawaiian Electric go up and down completely randomly.

Pair Corralation between Endesa SA and Hawaiian Electric

Assuming the 90 days horizon Endesa SA ADR is expected to under-perform the Hawaiian Electric. But the pink sheet apears to be less risky and, when comparing its historical volatility, Endesa SA ADR is 1.55 times less risky than Hawaiian Electric. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Hawaiian Electric is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,500  in Hawaiian Electric on October 15, 2024 and sell it today you would earn a total of  105.00  from holding Hawaiian Electric or generate 7.0% return on investment over 90 days.

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

Endesa SA ADR  vs.  Hawaiian Electric

Endesa SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Endesa SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Endesa SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hawaiian Electric

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hawaiian Electric are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Hawaiian Electric may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Endesa SA and Hawaiian Electric

The main advantage of trading using opposite Endesa SA and Hawaiian Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Endesa SA 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 Endesa SA ADR and Hawaiian Electric 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..