Correlation Between Hawaiian Electric and Consumers Energy

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

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

Diversification Opportunities for Hawaiian Electric and Consumers Energy

0.55

Correlation Coefficient

Hawaiian Electric  Consumers Energy

Very weak diversification

The 3 months correlation between Hawaiian and Consumers is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Electric Industries and Consumers Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumers Energy and Hawaiian Electric 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 Electric Industries are associated (or correlated) with Consumers Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumers Energy has no effect on the direction of Hawaiian Electric i.e., Hawaiian Electric and Consumers Energy go up and down completely randomly.

Pair Corralation between Hawaiian Electric and Consumers Energy

Allowing for the 90-day total investment horizon Hawaiian Electric Industries is expected to generate 2.87 times more return on investment than Consumers Energy. However, Hawaiian Electric is 2.87 times more volatile than Consumers Energy. It trades about 0.3 of its potential returns per unit of risk. Consumers Energy is currently generating about 0.13 per unit of risk. If you would invest  899.00  in Hawaiian Electric Industries on November 28, 2024 and sell it today you would earn a total of  183.00  from holding Hawaiian Electric Industries or generate 20.36% return on investment over 90 days.

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

Hawaiian Electric Industries  vs.  Consumers Energy

Hawaiian Electric

Risk-Adjusted Performance

Weak

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 March 2025.

Consumers Energy

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hawaiian Electric and Consumers Energy

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

The idea behind Hawaiian Electric Industries and Consumers Energy 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.