Correlation Between Hawaiian Holdings and Wesfarmers

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

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

Diversification Opportunities for Hawaiian Holdings and Wesfarmers

0.7

Correlation Coefficient

Hawaiian Holdings  Wesfarmers

Poor diversification

The 3 months correlation between Hawaiian and Wesfarmers is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Holdings and Wesfarmers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers Limited 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 Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers Limited has no effect on the direction of Hawaiian Holdings i.e., Hawaiian Holdings and Wesfarmers go up and down completely randomly.

Pair Corralation between Hawaiian Holdings and Wesfarmers

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 Together
Strength	Significant
Accuracy	8.33%
Values	Daily Returns

Hawaiian Holdings  vs.  Wesfarmers Limited

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.

Wesfarmers Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wesfarmers Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Wesfarmers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hawaiian Holdings and Wesfarmers

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

The idea behind Hawaiian Holdings and Wesfarmers Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.