Correlation Between NISOURCE and Dennys Corp

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

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

Diversification Opportunities for NISOURCE and Dennys Corp

0.33

Correlation Coefficient

NISOURCE  Dennys Corp

Weak diversification

The 3 months correlation between NISOURCE and Dennys is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding NISOURCE INC and Dennys Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dennys Corp 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 INC are associated (or correlated) with Dennys Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dennys Corp has no effect on the direction of NISOURCE i.e., NISOURCE and Dennys Corp go up and down completely randomly.

Pair Corralation between NISOURCE and Dennys Corp

Assuming the 90 days trading horizon NISOURCE INC is expected to generate 0.61 times more return on investment than Dennys Corp. However, NISOURCE INC is 1.65 times less risky than Dennys Corp. It trades about -0.25 of its potential returns per unit of risk. Dennys Corp is currently generating about -0.19 per unit of risk. If you would invest  9,206  in NISOURCE INC on September 26, 2024 and sell it today you would lose (763.00) from holding NISOURCE INC or give up 8.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

NISOURCE INC  vs.  Dennys Corp

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 current stock price disturbance, may contribute to short-term losses for the investors.

Dennys Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dennys Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with NISOURCE and Dennys Corp

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

The idea behind NISOURCE INC and Dennys Corp 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.