Correlation Between NiSource and BW OFFSHORE

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

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

Diversification Opportunities for NiSource and BW OFFSHORE

-0.43

Correlation Coefficient

NiSource  BW OFFSHORE

Very good diversification

The 3 months correlation between NiSource and XY81 is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and BW OFFSHORE LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW OFFSHORE LTD 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 BW OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW OFFSHORE LTD has no effect on the direction of NiSource i.e., NiSource and BW OFFSHORE go up and down completely randomly.

Pair Corralation between NiSource and BW OFFSHORE

Assuming the 90 days horizon NiSource is expected to generate 0.37 times more return on investment than BW OFFSHORE. However, NiSource is 2.74 times less risky than BW OFFSHORE. It trades about 0.18 of its potential returns per unit of risk. BW OFFSHORE LTD is currently generating about -0.06 per unit of risk. If you would invest  3,213  in NiSource on September 27, 2024 and sell it today you would earn a total of  267.00  from holding NiSource or generate 8.31% return on investment over 90 days.

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

NiSource  vs.  BW OFFSHORE LTD

NiSource

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 15 (%) 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.

BW OFFSHORE LTD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BW OFFSHORE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NiSource and BW OFFSHORE

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

The idea behind NiSource and BW OFFSHORE LTD 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.