Correlation Between Genuine Parts and NISOURCE

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

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

Diversification Opportunities for Genuine Parts and NISOURCE

0.72

Correlation Coefficient

Genuine Parts  NISOURCE

Poor diversification

The 3 months correlation between Genuine and NISOURCE is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts Co 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 Genuine Parts 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 Genuine Parts 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 FIN P has no effect on the direction of Genuine Parts i.e., Genuine Parts and NISOURCE go up and down completely randomly.

Pair Corralation between Genuine Parts and NISOURCE

Considering the 90-day investment horizon Genuine Parts Co is expected to generate 1.36 times more return on investment than NISOURCE. However, Genuine Parts is 1.36 times more volatile than NISOURCE FIN P. It trades about 0.03 of its potential returns per unit of risk. NISOURCE FIN P is currently generating about -0.05 per unit of risk. If you would invest  11,633  in Genuine Parts Co on December 24, 2024 and sell it today you would earn a total of  245.00  from holding Genuine Parts Co or generate 2.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	51.67%
Values	Daily Returns

Genuine Parts Co  vs.  NISOURCE FIN P

Genuine Parts

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Genuine Parts Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Genuine Parts is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

NISOURCE FIN P

Risk-Adjusted Performance

Weak

Over the last 90 days NISOURCE FIN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NISOURCE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Genuine Parts and NISOURCE

The main advantage of trading using opposite Genuine Parts and NISOURCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genuine Parts 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 Genuine Parts Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.