Correlation Between NiSource and GECCH

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

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

Diversification Opportunities for NiSource and GECCH

0.18

Correlation Coefficient

NiSource  GECCH

Average diversification

The 3 months correlation between NiSource and GECCH is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and GECCH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GECCH 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 GECCH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GECCH has no effect on the direction of NiSource i.e., NiSource and GECCH go up and down completely randomly.

Pair Corralation between NiSource and GECCH

Allowing for the 90-day total investment horizon NiSource is expected to generate 2.8 times more return on investment than GECCH. However, NiSource is 2.8 times more volatile than GECCH. It trades about 0.13 of its potential returns per unit of risk. GECCH is currently generating about 0.11 per unit of risk. If you would invest  3,392  in NiSource on September 17, 2024 and sell it today you would earn a total of  263.00  from holding NiSource or generate 7.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	89.23%
Values	Daily Returns

NiSource  vs.  GECCH

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 January 2025.

GECCH

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GECCH are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, GECCH is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with NiSource and GECCH

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

The idea behind NiSource and GECCH 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.