Correlation Between NiSource and Spire

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

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

Diversification Opportunities for NiSource and Spire

0.66

Correlation Coefficient

NiSource  Spire

Poor diversification

The 3 months correlation between NiSource and Spire is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Spire Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Inc 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 Spire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Inc has no effect on the direction of NiSource i.e., NiSource and Spire go up and down completely randomly.

Pair Corralation between NiSource and Spire

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.65 times more return on investment than Spire. However, NiSource is 1.53 times less risky than Spire. It trades about 0.27 of its potential returns per unit of risk. Spire Inc is currently generating about 0.14 per unit of risk. If you would invest  3,281  in NiSource on August 30, 2024 and sell it today you would earn a total of  544.00  from holding NiSource or generate 16.58% return on investment over 90 days.

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

NiSource  vs.  Spire Inc

NiSource

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, NiSource demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Spire Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spire Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Spire may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with NiSource and Spire

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

The idea behind NiSource and Spire Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.