Correlation Between NISOURCE and Topbuild Corp

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

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

Diversification Opportunities for NISOURCE and Topbuild Corp

-0.51

Correlation Coefficient

NISOURCE  Topbuild Corp

Excellent diversification

The 3 months correlation between NISOURCE and Topbuild is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding NISOURCE FIN P and Topbuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topbuild 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 FIN P are associated (or correlated) with Topbuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topbuild Corp has no effect on the direction of NISOURCE i.e., NISOURCE and Topbuild Corp go up and down completely randomly.

Pair Corralation between NISOURCE and Topbuild Corp

Assuming the 90 days trading horizon NISOURCE FIN P is expected to generate 0.5 times more return on investment than Topbuild Corp. However, NISOURCE FIN P is 1.99 times less risky than Topbuild Corp. It trades about 0.12 of its potential returns per unit of risk. Topbuild Corp is currently generating about 0.01 per unit of risk. If you would invest  9,317  in NISOURCE FIN P on December 25, 2024 and sell it today you would earn a total of  543.00  from holding NISOURCE FIN P or generate 5.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	75.0%
Values	Daily Returns

NISOURCE FIN P  vs.  Topbuild Corp

NISOURCE FIN P

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NISOURCE FIN P are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, NISOURCE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Topbuild Corp

Risk-Adjusted Performance

Weak

Over the last 90 days Topbuild Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Topbuild Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NISOURCE and Topbuild Corp

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

The idea behind NISOURCE FIN P and Topbuild 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.