Correlation Between Capital Group and NISOURCE

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

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

Diversification Opportunities for Capital Group and NISOURCE

0.13

Correlation Coefficient

Capital Group  NISOURCE

Average diversification

The 3 months correlation between Capital and NISOURCE is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group Core 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 Capital Group 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 Capital Group Core 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 Capital Group i.e., Capital Group and NISOURCE go up and down completely randomly.

Pair Corralation between Capital Group and NISOURCE

Given the investment horizon of 90 days Capital Group Core is expected to under-perform the NISOURCE. In addition to that, Capital Group is 1.02 times more volatile than NISOURCE FIN P. It trades about -0.09 of its total potential returns per unit of risk. NISOURCE FIN P is currently generating about 0.03 per unit of volatility. If you would invest  10,056  in NISOURCE FIN P on December 30, 2024 and sell it today you would earn a total of  66.00  from holding NISOURCE FIN P or generate 0.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	46.77%
Values	Daily Returns

Capital Group Core  vs.  NISOURCE FIN P

Capital Group Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Group Core has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Capital Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

NISOURCE FIN P

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NISOURCE FIN P are ranked lower than 2 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Capital Group and NISOURCE

The main advantage of trading using opposite Capital Group and NISOURCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Group 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 Capital Group Core 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.