Correlation Between NiSource and PPL

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

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

Diversification Opportunities for NiSource and PPL

0.81

Correlation Coefficient

NiSource  PPL

Very poor diversification

The 3 months correlation between NiSource and PPL is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and PPL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPL Corporation 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 PPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPL Corporation has no effect on the direction of NiSource i.e., NiSource and PPL go up and down completely randomly.

Pair Corralation between NiSource and PPL

Allowing for the 90-day total investment horizon NiSource is expected to generate 1.0 times more return on investment than PPL. However, NiSource is 1.0 times more volatile than PPL Corporation. It trades about 0.17 of its potential returns per unit of risk. PPL Corporation is currently generating about 0.11 per unit of risk. If you would invest  2,656  in NiSource on October 8, 2024 and sell it today you would earn a total of  901.00  from holding NiSource or generate 33.92% return on investment over 90 days.

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

NiSource  vs.  PPL Corp.

NiSource

Risk-Adjusted Performance

9 of 100

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 February 2025.

PPL Corporation

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days PPL Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, PPL is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with NiSource and PPL

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

The idea behind NiSource and PPL Corporation 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.