Correlation Between Spire and NiSource

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

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

Diversification Opportunities for Spire and NiSource

-0.06

Correlation Coefficient

Spire  NiSource

Good diversification

The 3 months correlation between Spire and NiSource is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Spire Inc and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource and Spire 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 Spire Inc 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 has no effect on the direction of Spire i.e., Spire and NiSource go up and down completely randomly.

Pair Corralation between Spire and NiSource

Assuming the 90 days horizon Spire is expected to generate 1.93 times less return on investment than NiSource. But when comparing it to its historical volatility, Spire Inc is 1.64 times less risky than NiSource. It trades about 0.06 of its potential returns per unit of risk. NiSource is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,585  in NiSource on September 14, 2024 and sell it today you would earn a total of  1,070  from holding NiSource or generate 41.39% return on investment over 90 days.

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

Spire Inc  vs.  NiSource

Spire Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

NiSource

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, NiSource may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Spire and NiSource

The main advantage of trading using opposite Spire and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spire 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 Spire Inc and NiSource 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.