Correlation Between NiSource and Hawaiian Electric

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

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

Diversification Opportunities for NiSource and Hawaiian Electric

0.8

Correlation Coefficient

NiSource  Hawaiian Electric

Very poor diversification

The 3 months correlation between NiSource and Hawaiian is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Hawaiian Electric Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Electric and NiSource 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 NiSource 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 NiSource i.e., NiSource and Hawaiian Electric go up and down completely randomly.

Pair Corralation between NiSource and Hawaiian Electric

Allowing for the 90-day total investment horizon NiSource is expected to generate 1.64 times less return on investment than Hawaiian Electric. But when comparing it to its historical volatility, NiSource is 2.29 times less risky than Hawaiian Electric. It trades about 0.12 of its potential returns per unit of risk. Hawaiian Electric Industries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  974.00  in Hawaiian Electric Industries on December 28, 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	Strong
Accuracy	100.0%
Values	Daily Returns

NiSource  vs.  Hawaiian Electric Industries

NiSource

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, NiSource may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hawaiian Electric

Risk-Adjusted Performance

OK

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.

Pair Trading with NiSource and Hawaiian Electric

The main advantage of trading using opposite NiSource and Hawaiian Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource 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 NiSource 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.