Correlation Between Hawaiian Electric and Bank of America
Can any of the company-specific risk be diversified away by investing in both Hawaiian Electric and Bank of America 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 Bank of America 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 Bank of America, you can compare the effects of market volatilities on Hawaiian Electric and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawaiian Electric and Bank of America.
Diversification Opportunities for Hawaiian Electric and Bank of America
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hawaiian and Bank is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Electric Industries and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Hawaiian Electric i.e., Hawaiian Electric and Bank of America go up and down completely randomly.
Pair Corralation between Hawaiian Electric and Bank of America
Allowing for the 90-day total investment horizon Hawaiian Electric is expected to generate 5.31 times less return on investment than Bank of America. In addition to that, Hawaiian Electric is 2.65 times more volatile than Bank of America. It trades about 0.01 of its total potential returns per unit of risk. Bank of America is currently generating about 0.1 per unit of volatility. If you would invest 3,831 in Bank of America on December 12, 2024 and sell it today you would earn a total of 1,946 from holding Bank of America or generate 50.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.65% |
| Values | Daily Returns |
Hawaiian Electric Industries vs. Bank of America
Performance |
| Timeline |
| Hawaiian Electric |
| Bank of America |
Hawaiian Electric and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hawaiian Electric and Bank of America
The main advantage of trading using opposite Hawaiian Electric and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawaiian Electric position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Hawaiian Electric vs. DTE Energy | ||
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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