Correlation Between NiSource and Drilling Tools

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

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

Diversification Opportunities for NiSource and Drilling Tools

0.31

Correlation Coefficient

NiSource  Drilling Tools

Weak diversification

The 3 months correlation between NiSource and Drilling is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Drilling Tools International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drilling Tools Inter 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 Drilling Tools. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drilling Tools Inter has no effect on the direction of NiSource i.e., NiSource and Drilling Tools go up and down completely randomly.

Pair Corralation between NiSource and Drilling Tools

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.3 times more return on investment than Drilling Tools. However, NiSource is 3.38 times less risky than Drilling Tools. It trades about 0.17 of its potential returns per unit of risk. Drilling Tools International is currently generating about -0.09 per unit of risk. If you would invest  3,083  in NiSource on October 25, 2024 and sell it today you would earn a total of  682.50  from holding NiSource or generate 22.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NiSource  vs.  Drilling Tools International

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 February 2025.

Drilling Tools Inter

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Drilling Tools International are ranked lower than 3 (%) 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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with NiSource and Drilling Tools

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

The idea behind NiSource and Drilling Tools International 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.