Correlation Between NiSource and Focus Home

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Can any of the company-specific risk be diversified away by investing in both NiSource and Focus Home 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 Focus Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NiSource and Focus Home Interactive, you can compare the effects of market volatilities on NiSource and Focus Home 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 Focus Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource and Focus Home.

Diversification Opportunities for NiSource and Focus Home

-0.65
  Correlation Coefficient

Excellent diversification

The 3 months correlation between NiSource and Focus is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Focus Home Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Home Interactive 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 Focus Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Home Interactive has no effect on the direction of NiSource i.e., NiSource and Focus Home go up and down completely randomly.

Pair Corralation between NiSource and Focus Home

Assuming the 90 days horizon NiSource is expected to under-perform the Focus Home. But the stock apears to be less risky and, when comparing its historical volatility, NiSource is 4.64 times less risky than Focus Home. The stock trades about -0.33 of its potential returns per unit of risk. The Focus Home Interactive is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,938  in Focus Home Interactive on September 28, 2024 and sell it today you would lose (58.00) from holding Focus Home Interactive or give up 2.99% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

NiSource  vs.  Focus Home Interactive

 Performance 
       Timeline  
NiSource 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NiSource reported solid returns over the last few months and may actually be approaching a breakup point.
Focus Home Interactive 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Focus Home Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NiSource and Focus Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NiSource and Focus Home

The main advantage of trading using opposite NiSource and Focus Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource position performs unexpectedly, Focus Home 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 Focus Home will offset losses from the drop in Focus Home's long position.
The idea behind NiSource and Focus Home Interactive 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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