Correlation Between GECCH and NiSource

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

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

Diversification Opportunities for GECCH and NiSource

0.18

Correlation Coefficient

GECCH  NiSource

Average diversification

The 3 months correlation between GECCH and NiSource is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding GECCH and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource and GECCH 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 GECCH 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 GECCH i.e., GECCH and NiSource go up and down completely randomly.

Pair Corralation between GECCH and NiSource

Assuming the 90 days horizon GECCH is expected to generate 4.07 times less return on investment than NiSource. But when comparing it to its historical volatility, GECCH is 2.9 times less risky than NiSource. It trades about 0.11 of its potential returns per unit of risk. NiSource is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,533  in NiSource on September 17, 2024 and sell it today you would earn a total of  1,122  from holding NiSource or generate 44.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	23.08%
Values	Daily Returns

GECCH  vs.  NiSource

GECCH

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GECCH are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, GECCH is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

NiSource

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 10 (%) 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 January 2025.

Pair Trading with GECCH and NiSource

The main advantage of trading using opposite GECCH and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GECCH 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 GECCH 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.