Correlation Between Hawaiian Holdings and Advantest

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

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

Diversification Opportunities for Hawaiian Holdings and Advantest

0.84

Correlation Coefficient

Hawaiian Holdings  Advantest

Very poor diversification

The 3 months correlation between Hawaiian and Advantest is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Holdings and Advantest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantest and Hawaiian Holdings 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 Holdings are associated (or correlated) with Advantest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantest has no effect on the direction of Hawaiian Holdings i.e., Hawaiian Holdings and Advantest go up and down completely randomly.

Pair Corralation between Hawaiian Holdings and Advantest

Allowing for the 90-day total investment horizon Hawaiian Holdings is expected to generate 0.59 times more return on investment than Advantest. However, Hawaiian Holdings is 1.71 times less risky than Advantest. It trades about 0.47 of its potential returns per unit of risk. Advantest is currently generating about 0.21 per unit of risk. If you would invest  1,729  in Hawaiian Holdings on September 12, 2024 and sell it today you would earn a total of  71.00  from holding Hawaiian Holdings or generate 4.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	8.06%
Values	Daily Returns

Hawaiian Holdings  vs.  Advantest

Hawaiian Holdings

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Hawaiian Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat abnormal basic indicators, Hawaiian Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Advantest

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advantest are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Advantest reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hawaiian Holdings and Advantest

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

The idea behind Hawaiian Holdings and Advantest 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 the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.