Correlation Between NiSource and McCormick Company

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

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

Diversification Opportunities for NiSource and McCormick Company

0.69

Correlation Coefficient

NiSource  McCormick Company

Poor diversification

The 3 months correlation between NiSource and McCormick is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and McCormick Company Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McCormick Company 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 McCormick Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McCormick Company has no effect on the direction of NiSource i.e., NiSource and McCormick Company go up and down completely randomly.

Pair Corralation between NiSource and McCormick Company

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.83 times more return on investment than McCormick Company. However, NiSource is 1.21 times less risky than McCormick Company. It trades about 0.12 of its potential returns per unit of risk. McCormick Company Incorporated is currently generating about 0.08 per unit of risk. If you would invest  3,642  in NiSource on December 30, 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	Significant
Accuracy	100.0%
Values	Daily Returns

NiSource  vs.  McCormick Company Incorporated

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.

McCormick Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in McCormick Company Incorporated are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, McCormick Company may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NiSource and McCormick Company

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

The idea behind NiSource and McCormick Company Incorporated 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.