Correlation Between NiSource Unit and American Electric

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

By analyzing existing cross correlation between NiSource Unit and American Electric Power, you can compare the effects of market volatilities on NiSource Unit and American Electric 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 Unit with a short position of American Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource Unit and American Electric.

Diversification Opportunities for NiSource Unit and American Electric

0.0

Correlation Coefficient

NiSource Unit  American Electric

Pay attention - limited upside

The 3 months correlation between NiSource and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NiSource Unit and American Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Electric Power and NiSource Unit 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 Unit are associated (or correlated) with American Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Electric Power has no effect on the direction of NiSource Unit i.e., NiSource Unit and American Electric go up and down completely randomly.

Pair Corralation between NiSource Unit and American Electric

If you would invest (100.00) in American Electric Power on December 30, 2024 and sell it today you would earn a total of  100.00  from holding American Electric Power or generate -100.0% return on investment over 90 days.

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

NiSource Unit  vs.  American Electric Power

NiSource Unit

Risk-Adjusted Performance

Very Weak

Over the last 90 days NiSource Unit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, NiSource Unit is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

American Electric Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Electric Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, American Electric is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NiSource Unit and American Electric

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

The idea behind NiSource Unit and American Electric Power 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.