Correlation Between Hawaiian Electric and Centrais Electricas

Can any of the company-specific risk be diversified away by investing in both Hawaiian Electric and Centrais Electricas 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 Centrais Electricas 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 Centrais Electricas Brasileiras, you can compare the effects of market volatilities on Hawaiian Electric and Centrais Electricas 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 Centrais Electricas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawaiian Electric and Centrais Electricas.

Diversification Opportunities for Hawaiian Electric and Centrais Electricas

0.46

Correlation Coefficient

Hawaiian Electric  Centrais Electricas

Very weak diversification

The 3 months correlation between Hawaiian and Centrais is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Electric Industries and Centrais Electricas Brasileira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Electricas 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 Centrais Electricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Electricas has no effect on the direction of Hawaiian Electric i.e., Hawaiian Electric and Centrais Electricas go up and down completely randomly.

Pair Corralation between Hawaiian Electric and Centrais Electricas

Allowing for the 90-day total investment horizon Hawaiian Electric is expected to generate 2.16 times less return on investment than Centrais Electricas. In addition to that, Hawaiian Electric is 1.38 times more volatile than Centrais Electricas Brasileiras. It trades about 0.05 of its total potential returns per unit of risk. Centrais Electricas Brasileiras is currently generating about 0.14 per unit of volatility. If you would invest  557.00  in Centrais Electricas Brasileiras on December 1, 2024 and sell it today you would earn a total of  95.00  from holding Centrais Electricas Brasileiras or generate 17.06% 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.  Centrais Electricas Brasileira

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.

Centrais Electricas

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Centrais Electricas Brasileiras are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Centrais Electricas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hawaiian Electric and Centrais Electricas

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

The idea behind Hawaiian Electric Industries and Centrais Electricas Brasileiras 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.