Correlation Between NiSource and Ocean Biomedical

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

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

Diversification Opportunities for NiSource and Ocean Biomedical

-0.2

Correlation Coefficient

NiSource  Ocean Biomedical

Good diversification

The 3 months correlation between NiSource and Ocean is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Ocean Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Biomedical 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 Ocean Biomedical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Biomedical has no effect on the direction of NiSource i.e., NiSource and Ocean Biomedical go up and down completely randomly.

Pair Corralation between NiSource and Ocean Biomedical

Allowing for the 90-day total investment horizon NiSource is expected to generate 2.76 times less return on investment than Ocean Biomedical. But when comparing it to its historical volatility, NiSource is 10.85 times less risky than Ocean Biomedical. It trades about 0.18 of its potential returns per unit of risk. Ocean Biomedical is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Ocean Biomedical on October 24, 2024 and sell it today you would lose (0.10) from holding Ocean Biomedical or give up 3.33% of portfolio value over 90 days.

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

NiSource  vs.  Ocean Biomedical

NiSource

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 11 (%) 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 February 2025.

Ocean Biomedical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocean Biomedical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with NiSource and Ocean Biomedical

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

The idea behind NiSource and Ocean Biomedical 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.