Correlation Between NiSource and BRIT AMER

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

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

Diversification Opportunities for NiSource and BRIT AMER

0.87

Correlation Coefficient

NiSource  BRIT AMER

Very poor diversification

The 3 months correlation between NiSource and BRIT is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and BRIT AMER TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRIT AMER TOBACCO 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 BRIT AMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRIT AMER TOBACCO has no effect on the direction of NiSource i.e., NiSource and BRIT AMER go up and down completely randomly.

Pair Corralation between NiSource and BRIT AMER

Assuming the 90 days horizon NiSource is expected to generate 0.85 times more return on investment than BRIT AMER. However, NiSource is 1.18 times less risky than BRIT AMER. It trades about 0.24 of its potential returns per unit of risk. BRIT AMER TOBACCO is currently generating about 0.17 per unit of risk. If you would invest  3,055  in NiSource on October 5, 2024 and sell it today you would earn a total of  485.00  from holding NiSource or generate 15.88% return on investment over 90 days.

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

NiSource  vs.  BRIT AMER TOBACCO

NiSource

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days NiSource has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, NiSource reported solid returns over the last few months and may actually be approaching a breakup point.

BRIT AMER TOBACCO

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days BRIT AMER TOBACCO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, BRIT AMER unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NiSource and BRIT AMER

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

The idea behind NiSource and BRIT AMER TOBACCO 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.