Correlation Between NiSource and SOUTHERN

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

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

Diversification Opportunities for NiSource and SOUTHERN

-0.47

Correlation Coefficient

NiSource  SOUTHERN

Very good diversification

The 3 months correlation between NiSource and SOUTHERN is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and SOUTHERN PER CORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHERN PER P 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 SOUTHERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUTHERN PER P has no effect on the direction of NiSource i.e., NiSource and SOUTHERN go up and down completely randomly.

Pair Corralation between NiSource and SOUTHERN

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.87 times more return on investment than SOUTHERN. However, NiSource is 1.15 times less risky than SOUTHERN. It trades about 0.13 of its potential returns per unit of risk. SOUTHERN PER CORP is currently generating about -0.06 per unit of risk. If you would invest  3,376  in NiSource on October 6, 2024 and sell it today you would earn a total of  263.00  from holding NiSource or generate 7.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

NiSource  vs.  SOUTHERN PER 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.

SOUTHERN PER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOUTHERN PER CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SOUTHERN 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 SOUTHERN

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

The idea behind NiSource and SOUTHERN PER CORP 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.