Correlation Between Hawaiian Electric and Entergy New

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

Diversification Opportunities for Hawaiian Electric and Entergy New

-0.43

Correlation Coefficient

Hawaiian Electric  Entergy New

Very good diversification

The 3 months correlation between Hawaiian and Entergy is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Electric Industries and Entergy New Orleans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy New Orleans 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 Entergy New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy New Orleans has no effect on the direction of Hawaiian Electric i.e., Hawaiian Electric and Entergy New go up and down completely randomly.

Pair Corralation between Hawaiian Electric and Entergy New

Allowing for the 90-day total investment horizon Hawaiian Electric Industries is expected to generate 2.7 times more return on investment than Entergy New. However, Hawaiian Electric is 2.7 times more volatile than Entergy New Orleans. It trades about 0.01 of its potential returns per unit of risk. Entergy New Orleans is currently generating about 0.02 per unit of risk. If you would invest  1,073  in Hawaiian Electric Industries on August 30, 2024 and sell it today you would lose (20.00) from holding Hawaiian Electric Industries or give up 1.86% of portfolio value over 90 days.

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

Hawaiian Electric Industries  vs.  Entergy New Orleans

Hawaiian Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hawaiian Electric Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Hawaiian Electric is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Entergy New Orleans

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Entergy New Orleans are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Entergy New is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Hawaiian Electric and Entergy New

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

The idea behind Hawaiian Electric Industries and Entergy New Orleans 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.