Correlation Between Hawaiian Holdings and ADM Endeavors

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

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

Diversification Opportunities for Hawaiian Holdings and ADM Endeavors

-0.56

Correlation Coefficient

Hawaiian Holdings  ADM Endeavors

Excellent diversification

The 3 months correlation between Hawaiian and ADM is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Holdings and ADM Endeavors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADM Endeavors and Hawaiian Holdings 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 Hawaiian Holdings are associated (or correlated) with ADM Endeavors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADM Endeavors has no effect on the direction of Hawaiian Holdings i.e., Hawaiian Holdings and ADM Endeavors go up and down completely randomly.

Pair Corralation between Hawaiian Holdings and ADM Endeavors

Allowing for the 90-day total investment horizon Hawaiian Holdings is expected to generate 0.17 times more return on investment than ADM Endeavors. However, Hawaiian Holdings is 5.97 times less risky than ADM Endeavors. It trades about 0.27 of its potential returns per unit of risk. ADM Endeavors is currently generating about 0.01 per unit of risk. If you would invest  1,718  in Hawaiian Holdings on September 3, 2024 and sell it today you would earn a total of  82.00  from holding Hawaiian Holdings or generate 4.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	18.75%
Values	Daily Returns

Hawaiian Holdings  vs.  ADM Endeavors

Hawaiian Holdings

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Hawaiian Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat abnormal basic indicators, Hawaiian Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

ADM Endeavors

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ADM Endeavors are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, ADM Endeavors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hawaiian Holdings and ADM Endeavors

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

The idea behind Hawaiian Holdings and ADM Endeavors 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.