Correlation Between Idacorp and Hawaiian Electric

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Can any of the company-specific risk be diversified away by investing in both Idacorp 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 Idacorp and Hawaiian Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Idacorp and Hawaiian Electric Industries, you can compare the effects of market volatilities on Idacorp 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 Idacorp with a short position of Hawaiian Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Idacorp and Hawaiian Electric.

Diversification Opportunities for Idacorp and Hawaiian Electric

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Idacorp and Hawaiian is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Idacorp and Hawaiian Electric Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Electric and Idacorp 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 Idacorp 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 Idacorp i.e., Idacorp and Hawaiian Electric go up and down completely randomly.

Pair Corralation between Idacorp and Hawaiian Electric

Considering the 90-day investment horizon Idacorp is expected to generate 0.98 times more return on investment than Hawaiian Electric. However, Idacorp is 1.02 times less risky than Hawaiian Electric. It trades about 0.03 of its potential returns per unit of risk. Hawaiian Electric Industries is currently generating about 0.03 per unit of risk. If you would invest  10,810  in Idacorp on May 14, 2022 and sell it today you would earn a total of  504.00  from holding Idacorp or generate 4.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Idacorp  vs.  Hawaiian Electric Industries

 Performance (%) 
       Timeline  
Idacorp 
Idacorp Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Idacorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Idacorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Idacorp Price Channel

Hawaiian Electric 
Hawaiian Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Hawaiian Electric Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Hawaiian Electric is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Hawaiian Price Channel

Idacorp and Hawaiian Electric Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Idacorp and Hawaiian Electric

The main advantage of trading using opposite Idacorp and Hawaiian Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Idacorp 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 Idacorp 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.
Check out your portfolio center. 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 ETF Directory module to find actively traded Exchange Traded Funds (ETF) from around the world.

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