Correlation Between NiSource and SBM Offshore

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

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

Diversification Opportunities for NiSource and SBM Offshore

0.15

Correlation Coefficient

NiSource  SBM Offshore

Average diversification

The 3 months correlation between NiSource and SBM is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV 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 SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of NiSource i.e., NiSource and SBM Offshore go up and down completely randomly.

Pair Corralation between NiSource and SBM Offshore

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.52 times more return on investment than SBM Offshore. However, NiSource is 1.92 times less risky than SBM Offshore. It trades about 0.12 of its potential returns per unit of risk. SBM Offshore NV is currently generating about -0.05 per unit of risk. If you would invest  3,412  in NiSource on September 15, 2024 and sell it today you would earn a total of  243.00  from holding NiSource or generate 7.12% return on investment over 90 days.

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

NiSource  vs.  SBM Offshore NV

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 January 2025.

SBM Offshore NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBM Offshore NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, SBM Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NiSource and SBM Offshore

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

The idea behind NiSource and SBM Offshore NV 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.