Correlation Between NISOURCE and 00108WAF7

Can any of the company-specific risk be diversified away by investing in both NISOURCE and 00108WAF7 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 00108WAF7 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 AEP TEX INC, you can compare the effects of market volatilities on NISOURCE and 00108WAF7 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 00108WAF7. Check out your portfolio center. Please also check ongoing floating volatility patterns of NISOURCE and 00108WAF7.

Diversification Opportunities for NISOURCE and 00108WAF7

0.67

Correlation Coefficient

NISOURCE  00108WAF7

Poor diversification

The 3 months correlation between NISOURCE and 00108WAF7 is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NISOURCE FIN P and AEP TEX INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEP TEX INC 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 00108WAF7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEP TEX INC has no effect on the direction of NISOURCE i.e., NISOURCE and 00108WAF7 go up and down completely randomly.

Pair Corralation between NISOURCE and 00108WAF7

Assuming the 90 days trading horizon NISOURCE FIN P is expected to generate 1.66 times more return on investment than 00108WAF7. However, NISOURCE is 1.66 times more volatile than AEP TEX INC. It trades about 0.14 of its potential returns per unit of risk. AEP TEX INC is currently generating about -0.08 per unit of risk. If you would invest  9,488  in NISOURCE FIN P on December 28, 2024 and sell it today you would earn a total of  372.00  from holding NISOURCE FIN P or generate 3.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	80.0%
Values	Daily Returns

NISOURCE FIN P  vs.  AEP TEX INC

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 8 (%) 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.

AEP TEX INC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AEP TEX INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 00108WAF7 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NISOURCE and 00108WAF7

The main advantage of trading using opposite NISOURCE and 00108WAF7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NISOURCE position performs unexpectedly, 00108WAF7 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 00108WAF7 will offset losses from the drop in 00108WAF7's long position.

The idea behind NISOURCE FIN P and AEP TEX 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.