Correlation Between Korea Electric and Hawaiian Electric

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

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

Diversification Opportunities for Korea Electric and Hawaiian Electric

0.51

Correlation Coefficient

Korea Electric  Hawaiian Electric

Very weak diversification

The 3 months correlation between Korea and Hawaiian is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power and Hawaiian Electric Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Electric and Korea 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 Korea Electric Power are associated (or correlated) with Hawaiian Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawaiian Electric has no effect on the direction of Korea Electric i.e., Korea Electric and Hawaiian Electric go up and down completely randomly.

Pair Corralation between Korea Electric and Hawaiian Electric

Considering the 90-day investment horizon Korea Electric Power is expected to generate 0.7 times more return on investment than Hawaiian Electric. However, Korea Electric Power is 1.44 times less risky than Hawaiian Electric. It trades about 0.08 of its potential returns per unit of risk. Hawaiian Electric Industries is currently generating about -0.04 per unit of risk. If you would invest  814.00  in Korea Electric Power on September 3, 2024 and sell it today you would earn a total of  86.00  from holding Korea Electric Power or generate 10.57% return on investment over 90 days.

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

Korea Electric Power  vs.  Hawaiian Electric Industries

Korea Electric Power

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Electric Power are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Korea Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Korea Electric and Hawaiian Electric

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

The idea behind Korea Electric Power and Hawaiian Electric Industries 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.