Correlation Between Hawaiian Electric and Entergy

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

Diversification Opportunities for Hawaiian Electric and Entergy

-0.8

Correlation Coefficient

Hawaiian Electric  Entergy

Pay attention - limited upside

The 3 months correlation between Hawaiian and Entergy is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Electric Industries and Entergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy has no effect on the direction of Hawaiian Electric i.e., Hawaiian Electric and Entergy go up and down completely randomly.

Pair Corralation between Hawaiian Electric and Entergy

Allowing for the 90-day total investment horizon Hawaiian Electric Industries is expected to under-perform the Entergy. In addition to that, Hawaiian Electric is 2.86 times more volatile than Entergy. It trades about -0.07 of its total potential returns per unit of risk. Entergy is currently generating about 0.1 per unit of volatility. If you would invest  10,202  in Entergy on February 2, 2024 and sell it today you would earn a total of  437.00  from holding Entergy or generate 4.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

Hawaiian Electric Industries  vs.  Entergy

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Entergy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entergy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Entergy may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Hawaiian Electric and Entergy

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

The idea behind Hawaiian Electric Industries and Entergy 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .