Correlation Between Drilling Tools and NiSource

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

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

Diversification Opportunities for Drilling Tools and NiSource

-0.23

Correlation Coefficient

Drilling Tools  NiSource

Very good diversification

The 3 months correlation between Drilling and NiSource is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Drilling Tools International and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource and Drilling Tools 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 Drilling Tools International 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 Drilling Tools i.e., Drilling Tools and NiSource go up and down completely randomly.

Pair Corralation between Drilling Tools and NiSource

Considering the 90-day investment horizon Drilling Tools International is expected to under-perform the NiSource. In addition to that, Drilling Tools is 2.38 times more volatile than NiSource. It trades about -0.03 of its total potential returns per unit of risk. NiSource is currently generating about -0.02 per unit of volatility. If you would invest  3,661  in NiSource on October 10, 2024 and sell it today you would lose (16.00) from holding NiSource or give up 0.44% of portfolio value over 90 days.

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

Drilling Tools International  vs.  NiSource

Drilling Tools Inter

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Drilling Tools International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Drilling Tools is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

NiSource

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 8 (%) 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 February 2025.

Pair Trading with Drilling Tools and NiSource

The main advantage of trading using opposite Drilling Tools and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Drilling Tools 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 Drilling Tools International 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.