Correlation Between NiSource and Utilities Portfolio

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

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

Diversification Opportunities for NiSource and Utilities Portfolio

0.37

Correlation Coefficient

NiSource  Utilities Portfolio

Weak diversification

The 3 months correlation between NiSource and Utilities is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Utilities Portfolio Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Portfolio 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 Utilities Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Portfolio has no effect on the direction of NiSource i.e., NiSource and Utilities Portfolio go up and down completely randomly.

Pair Corralation between NiSource and Utilities Portfolio

Allowing for the 90-day total investment horizon NiSource is expected to generate 1.16 times more return on investment than Utilities Portfolio. However, NiSource is 1.16 times more volatile than Utilities Portfolio Utilities. It trades about 0.12 of its potential returns per unit of risk. Utilities Portfolio Utilities is currently generating about 0.02 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.  Utilities Portfolio Utilities

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.

Utilities Portfolio

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Portfolio Utilities are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Utilities Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NiSource and Utilities Portfolio

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

The idea behind NiSource and Utilities Portfolio Utilities 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.