Correlation Between Eastern and NISOURCE

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

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

Diversification Opportunities for Eastern and NISOURCE

0.61

Correlation Coefficient

Eastern  NISOURCE

Poor diversification

The 3 months correlation between Eastern and NISOURCE is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and NISOURCE INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISOURCE INC and Eastern 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 Eastern Co 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 INC has no effect on the direction of Eastern i.e., Eastern and NISOURCE go up and down completely randomly.

Pair Corralation between Eastern and NISOURCE

Considering the 90-day investment horizon Eastern Co is expected to generate 4.4 times more return on investment than NISOURCE. However, Eastern is 4.4 times more volatile than NISOURCE INC. It trades about 0.03 of its potential returns per unit of risk. NISOURCE INC is currently generating about -0.03 per unit of risk. If you would invest  2,460  in Eastern Co on October 22, 2024 and sell it today you would earn a total of  310.00  from holding Eastern Co or generate 12.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	79.84%
Values	Daily Returns

Eastern Co  vs.  NISOURCE INC

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

NISOURCE INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NISOURCE INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for NISOURCE INC investors.

Pair Trading with Eastern and NISOURCE

The main advantage of trading using opposite Eastern and NISOURCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern 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 Eastern Co and NISOURCE INC 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.