Correlation Between NewJersey Resources and NiSource

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

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

Diversification Opportunities for NewJersey Resources and NiSource

0.55

Correlation Coefficient

NewJersey Resources  NiSource

Very weak diversification

The 3 months correlation between NewJersey and NiSource is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding NewJersey Resources and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource and NewJersey Resources 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 NewJersey Resources are associated (or correlated) with NiSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NiSource has no effect on the direction of NewJersey Resources i.e., NewJersey Resources and NiSource go up and down completely randomly.

Pair Corralation between NewJersey Resources and NiSource

Considering the 90-day investment horizon NewJersey Resources is expected to generate 1.32 times less return on investment than NiSource. But when comparing it to its historical volatility, NewJersey Resources is 1.03 times less risky than NiSource. It trades about 0.09 of its potential returns per unit of risk. NiSource is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,642  in NiSource on December 29, 2024 and sell it today you would earn a total of  350.00  from holding NiSource or generate 9.61% return on investment over 90 days.

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

NewJersey Resources  vs.  NiSource

NewJersey Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NewJersey Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward-looking indicators, NewJersey Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NiSource

Risk-Adjusted Performance

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 April 2025.

Pair Trading with NewJersey Resources and NiSource

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

The idea behind NewJersey Resources and NiSource 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.