Correlation Between FirstEnergy and Hawaiian Electric

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

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

Diversification Opportunities for FirstEnergy and Hawaiian Electric

0.7

Correlation Coefficient

FirstEnergy  Hawaiian Electric

Poor diversification

The 3 months correlation between FirstEnergy and Hawaiian is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and Hawaiian Electric Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Electric and FirstEnergy 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 FirstEnergy 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 FirstEnergy i.e., FirstEnergy and Hawaiian Electric go up and down completely randomly.

Pair Corralation between FirstEnergy and Hawaiian Electric

Allowing for the 90-day total investment horizon FirstEnergy is expected to under-perform the Hawaiian Electric. But the stock apears to be less risky and, when comparing its historical volatility, FirstEnergy is 1.54 times less risky than Hawaiian Electric. The stock trades about -0.05 of its potential returns per unit of risk. The Hawaiian Electric Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,035  in Hawaiian Electric Industries on December 1, 2024 and sell it today you would earn a total of  60.00  from holding Hawaiian Electric Industries or generate 5.8% return on investment over 90 days.

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

FirstEnergy  vs.  Hawaiian Electric Industries

FirstEnergy

Risk-Adjusted Performance

Very Weak

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

Hawaiian Electric

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hawaiian Electric Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Hawaiian Electric may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with FirstEnergy and Hawaiian Electric

The main advantage of trading using opposite FirstEnergy and Hawaiian Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstEnergy 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 FirstEnergy 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.