Correlation Between Antero Midstream and NiSource

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

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

Diversification Opportunities for Antero Midstream and NiSource

0.8

Correlation Coefficient

Antero Midstream  NiSource

Very poor diversification

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

Pair Corralation between Antero Midstream and NiSource

Allowing for the 90-day total investment horizon Antero Midstream is expected to generate 1.42 times less return on investment than NiSource. In addition to that, Antero Midstream is 1.51 times more volatile than NiSource. It trades about 0.04 of its total potential returns per unit of risk. NiSource is currently generating about 0.09 per unit of volatility. If you would invest  3,780  in NiSource on November 28, 2024 and sell it today you would earn a total of  239.50  from holding NiSource or generate 6.34% return on investment over 90 days.

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

Antero Midstream Partners  vs.  NiSource

Antero Midstream Partners

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Antero Midstream is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

NiSource

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, NiSource may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Antero Midstream and NiSource

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

The idea behind Antero Midstream Partners and NiSource 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.