Correlation Between MicroSectors Solactive and NISOURCE

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

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

Diversification Opportunities for MicroSectors Solactive and NISOURCE

-0.41

Correlation Coefficient

MicroSectors Solactive  NISOURCE

Very good diversification

The 3 months correlation between MicroSectors and NISOURCE is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Solactive FANG 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 MicroSectors Solactive 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 MicroSectors Solactive FANG 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 MicroSectors Solactive i.e., MicroSectors Solactive and NISOURCE go up and down completely randomly.

Pair Corralation between MicroSectors Solactive and NISOURCE

Given the investment horizon of 90 days MicroSectors Solactive FANG is expected to under-perform the NISOURCE. In addition to that, MicroSectors Solactive is 1.31 times more volatile than NISOURCE FIN P. It trades about -0.05 of its total potential returns per unit of risk. NISOURCE FIN P is currently generating about 0.13 per unit of volatility. If you would invest  10,478  in NISOURCE FIN P on October 10, 2024 and sell it today you would earn a total of  185.00  from holding NISOURCE FIN P or generate 1.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	19.05%
Values	Daily Returns

MicroSectors Solactive FANG  vs.  NISOURCE FIN P

MicroSectors Solactive

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Solactive FANG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, MicroSectors Solactive showed solid returns over the last few months and may actually be approaching a breakup point.

NISOURCE FIN P

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NISOURCE FIN P are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NISOURCE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MicroSectors Solactive and NISOURCE

The main advantage of trading using opposite MicroSectors Solactive and NISOURCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors Solactive 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 MicroSectors Solactive FANG 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..