Correlation Between NISOURCE and Bt Brands

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

Diversification Opportunities for NISOURCE and Bt Brands

0.21

Correlation Coefficient

NISOURCE  Bt Brands

Modest diversification

The 3 months correlation between NISOURCE and BTBD is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding NISOURCE FIN P and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands 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 Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of NISOURCE i.e., NISOURCE and Bt Brands go up and down completely randomly.

Pair Corralation between NISOURCE and Bt Brands

Assuming the 90 days trading horizon NISOURCE FIN P is expected to generate 9.0 times more return on investment than Bt Brands. However, NISOURCE is 9.0 times more volatile than Bt Brands. It trades about 0.05 of its potential returns per unit of risk. Bt Brands is currently generating about 0.03 per unit of risk. If you would invest  9,516  in NISOURCE FIN P on October 23, 2024 and sell it today you would lose (699.00) from holding NISOURCE FIN P or give up 7.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	73.33%
Values	Daily Returns

NISOURCE FIN P  vs.  Bt Brands

NISOURCE FIN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NISOURCE FIN P 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.

Bt Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bt Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Bt Brands 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 Bt Brands

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

The idea behind NISOURCE FIN P and Bt Brands 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.