Correlation Between Shopify and NISOURCE

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

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

Diversification Opportunities for Shopify and NISOURCE

-0.21

Correlation Coefficient

Shopify  NISOURCE

Very good diversification

The 3 months correlation between Shopify and NISOURCE is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and NISOURCE INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISOURCE INC and Shopify 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 Shopify 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 INC has no effect on the direction of Shopify i.e., Shopify and NISOURCE go up and down completely randomly.

Pair Corralation between Shopify and NISOURCE

Given the investment horizon of 90 days Shopify is expected to under-perform the NISOURCE. But the stock apears to be less risky and, when comparing its historical volatility, Shopify is 1.12 times less risky than NISOURCE. The stock trades about -0.07 of its potential returns per unit of risk. The NISOURCE INC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  9,129  in NISOURCE INC on October 20, 2024 and sell it today you would lose (25.00) from holding NISOURCE INC or give up 0.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Shopify  vs.  NISOURCE INC

Shopify

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Shopify reported solid returns over the last few months and may actually be approaching a breakup point.

NISOURCE INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NISOURCE INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NISOURCE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shopify and NISOURCE

The main advantage of trading using opposite Shopify and NISOURCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shopify 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 Shopify and NISOURCE INC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.