Correlation Between NiSource and APA

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

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

Diversification Opportunities for NiSource and APA

-0.48

Correlation Coefficient

NiSource  APA

Very good diversification

The 3 months correlation between NiSource and APA is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and APA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Group 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 APA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APA Group has no effect on the direction of NiSource i.e., NiSource and APA go up and down completely randomly.

Pair Corralation between NiSource and APA

Assuming the 90 days horizon NiSource is expected to under-perform the APA. But the stock apears to be less risky and, when comparing its historical volatility, NiSource is 3.28 times less risky than APA. The stock trades about -0.24 of its potential returns per unit of risk. The APA Group is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  437.00  in APA Group on September 25, 2024 and sell it today you would lose (16.00) from holding APA Group or give up 3.66% of portfolio value over 90 days.

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

NiSource  vs.  APA Group

NiSource

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 16 (%) 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.

APA Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APA Group 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.

Pair Trading with NiSource and APA

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

The idea behind NiSource and APA Group 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..