Correlation Between NiSource and China Gas

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

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

Diversification Opportunities for NiSource and China Gas

-0.16

Correlation Coefficient

NiSource  China Gas

Good diversification

The 3 months correlation between NiSource and China is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and China Gas Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Gas Holdings and NiSource 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 NiSource are associated (or correlated) with China Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Gas Holdings has no effect on the direction of NiSource i.e., NiSource and China Gas go up and down completely randomly.

Pair Corralation between NiSource and China Gas

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.91 times more return on investment than China Gas. However, NiSource is 1.1 times less risky than China Gas. It trades about 0.12 of its potential returns per unit of risk. China Gas Holdings is currently generating about 0.1 per unit of risk. If you would invest  3,590  in NiSource on December 20, 2024 and sell it today you would earn a total of  338.00  from holding NiSource or generate 9.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.33%
Values	Daily Returns

NiSource  vs.  China Gas Holdings

NiSource

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 9 (%) 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 April 2025.

China Gas Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Gas Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, China Gas may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NiSource and China Gas

The main advantage of trading using opposite NiSource and China Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource position performs unexpectedly, China Gas 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 China Gas will offset losses from the drop in China Gas' long position.

The idea behind NiSource and China Gas Holdings 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.