Correlation Between NiSource and MACOM Technology

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

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

Diversification Opportunities for NiSource and MACOM Technology

-0.68

Correlation Coefficient

NiSource  MACOM Technology

Excellent diversification

The 3 months correlation between NiSource and MACOM is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol 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 MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of NiSource i.e., NiSource and MACOM Technology go up and down completely randomly.

Pair Corralation between NiSource and MACOM Technology

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.39 times more return on investment than MACOM Technology. However, NiSource is 2.56 times less risky than MACOM Technology. It trades about 0.16 of its potential returns per unit of risk. MACOM Technology Solutions is currently generating about -0.11 per unit of risk. If you would invest  3,700  in NiSource on December 5, 2024 and sell it today you would earn a total of  423.00  from holding NiSource or generate 11.43% return on investment over 90 days.

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

NiSource  vs.  MACOM Technology Solutions

NiSource

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 12 (%) 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.

MACOM Technology Sol

Risk-Adjusted Performance

Very Weak

Over the last 90 days MACOM Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with NiSource and MACOM Technology

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

The idea behind NiSource and MACOM Technology Solutions 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.