Correlation Between NiSource and FirstEnergy

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

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

Diversification Opportunities for NiSource and FirstEnergy

0.34

Correlation Coefficient

NiSource  FirstEnergy

Weak diversification

The 3 months correlation between NiSource and FirstEnergy is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and FirstEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstEnergy 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 FirstEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstEnergy has no effect on the direction of NiSource i.e., NiSource and FirstEnergy go up and down completely randomly.

Pair Corralation between NiSource and FirstEnergy

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.67 times more return on investment than FirstEnergy. However, NiSource is 1.49 times less risky than FirstEnergy. It trades about 0.12 of its potential returns per unit of risk. FirstEnergy is currently generating about 0.01 per unit of risk. If you would invest  3,642  in NiSource on December 29, 2024 and sell it today you would earn a total of  350.00  from holding NiSource or generate 9.61% 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.  FirstEnergy

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.

FirstEnergy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FirstEnergy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, FirstEnergy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NiSource and FirstEnergy

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

The idea behind NiSource and FirstEnergy 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.