Correlation Between Hawaiian Electric and Vanguard Utilities

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

Diversification Opportunities for Hawaiian Electric and Vanguard Utilities

0.54

Correlation Coefficient

Hawaiian Electric  Vanguard Utilities

Very weak diversification

The 3 months correlation between Hawaiian and Vanguard is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Electric Industries and Vanguard Utilities Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Utilities Index 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 Vanguard Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Utilities Index has no effect on the direction of Hawaiian Electric i.e., Hawaiian Electric and Vanguard Utilities go up and down completely randomly.

Pair Corralation between Hawaiian Electric and Vanguard Utilities

Allowing for the 90-day total investment horizon Hawaiian Electric Industries is expected to generate 2.77 times more return on investment than Vanguard Utilities. However, Hawaiian Electric is 2.77 times more volatile than Vanguard Utilities Index. It trades about 0.09 of its potential returns per unit of risk. Vanguard Utilities Index is currently generating about 0.05 per unit of risk. If you would invest  974.00  in Hawaiian Electric Industries on December 30, 2024 and sell it today you would earn a total of  138.00  from holding Hawaiian Electric Industries or generate 14.17% 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.  Vanguard Utilities Index

Hawaiian Electric

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hawaiian Electric Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Hawaiian Electric exhibited solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Utilities Index

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Utilities Index are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Utilities 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 Vanguard Utilities

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

The idea behind Hawaiian Electric Industries and Vanguard Utilities Index 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.