Correlation Between Hawaiian Holdings and Direct Equity

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

By analyzing existing cross correlation between Hawaiian Holdings and Direct Equity International, you can compare the effects of market volatilities on Hawaiian Holdings and Direct Equity 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 Direct Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawaiian Holdings and Direct Equity.

Diversification Opportunities for Hawaiian Holdings and Direct Equity

-0.88

Correlation Coefficient

Hawaiian Holdings  Direct Equity

Pay attention - limited upside

The 3 months correlation between Hawaiian and Direct is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Holdings and Direct Equity International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Equity Intern 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 Direct Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Equity Intern has no effect on the direction of Hawaiian Holdings i.e., Hawaiian Holdings and Direct Equity go up and down completely randomly.

Pair Corralation between Hawaiian Holdings and Direct Equity

Allowing for the 90-day total investment horizon Hawaiian Holdings is expected to generate 0.12 times more return on investment than Direct Equity. However, Hawaiian Holdings is 8.62 times less risky than Direct Equity. It trades about 0.4 of its potential returns per unit of risk. Direct Equity International is currently generating about -0.13 per unit of risk. If you would invest  1,704  in Hawaiian Holdings on September 5, 2024 and sell it today you would earn a total of  96.00  from holding Hawaiian Holdings or generate 5.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	15.63%
Values	Daily Returns

Hawaiian Holdings  vs.  Direct Equity International

Hawaiian Holdings

Risk-Adjusted Performance

0 of 100

Very Strong

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.

Direct Equity Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direct Equity International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Hawaiian Holdings and Direct Equity

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

The idea behind Hawaiian Holdings and Direct Equity International 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 Global Correlations module to find global opportunities by holding instruments from different markets.