Correlation Between Hawaiian Electric and DTE Energy

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

Diversification Opportunities for Hawaiian Electric and DTE Energy

-0.2

Correlation Coefficient

Hawaiian Electric  DTE Energy

Good diversification

The 3 months correlation between Hawaiian and DTE is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Electric Industries and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy 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 DTE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTE Energy has no effect on the direction of Hawaiian Electric i.e., Hawaiian Electric and DTE Energy go up and down completely randomly.

Pair Corralation between Hawaiian Electric and DTE Energy

Allowing for the 90-day total investment horizon Hawaiian Electric Industries is expected to generate 1.98 times more return on investment than DTE Energy. However, Hawaiian Electric is 1.98 times more volatile than DTE Energy. It trades about 0.11 of its potential returns per unit of risk. DTE Energy is currently generating about 0.06 per unit of risk. If you would invest  1,000.00  in Hawaiian Electric Industries on August 31, 2024 and sell it today you would earn a total of  53.00  from holding Hawaiian Electric Industries or generate 5.3% return on investment over 90 days.

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

Hawaiian Electric Industries  vs.  DTE Energy

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.

DTE Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DTE Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, DTE Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hawaiian Electric and DTE Energy

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

The idea behind Hawaiian Electric Industries and DTE Energy 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.