Correlation Between Topbuild Corp and NISOURCE

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

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

Diversification Opportunities for Topbuild Corp and NISOURCE

-0.51

Correlation Coefficient

Topbuild Corp  NISOURCE

Excellent diversification

The 3 months correlation between Topbuild and NISOURCE is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Topbuild Corp and NISOURCE FIN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISOURCE FIN P and Topbuild Corp 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 Topbuild Corp 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 FIN P has no effect on the direction of Topbuild Corp i.e., Topbuild Corp and NISOURCE go up and down completely randomly.

Pair Corralation between Topbuild Corp and NISOURCE

Considering the 90-day investment horizon Topbuild Corp is expected to under-perform the NISOURCE. In addition to that, Topbuild Corp is 2.35 times more volatile than NISOURCE FIN P. It trades about -0.08 of its total potential returns per unit of risk. NISOURCE FIN P is currently generating about -0.01 per unit of volatility. If you would invest  9,979  in NISOURCE FIN P on December 25, 2024 and sell it today you would lose (119.00) from holding NISOURCE FIN P or give up 1.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	68.29%
Values	Daily Returns

Topbuild Corp  vs.  NISOURCE FIN P

Topbuild Corp

Risk-Adjusted Performance

Weak

Over the last 90 days Topbuild Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Topbuild Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

NISOURCE FIN P

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NISOURCE FIN P are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, NISOURCE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Topbuild Corp and NISOURCE

The main advantage of trading using opposite Topbuild Corp and NISOURCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Topbuild Corp 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 Topbuild Corp and NISOURCE FIN P 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.