Correlation Between Occidental and NiSource

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

By analyzing existing cross correlation between Occidental Petroleum 44 and NiSource, you can compare the effects of market volatilities on Occidental 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 Occidental with a short position of NiSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental and NiSource.

Diversification Opportunities for Occidental and NiSource

-0.41

Correlation Coefficient

Occidental  NiSource

Very good diversification

The 3 months correlation between Occidental and NiSource is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum 44 and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource and Occidental 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 Occidental Petroleum 44 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 Occidental i.e., Occidental and NiSource go up and down completely randomly.

Pair Corralation between Occidental and NiSource

Assuming the 90 days trading horizon Occidental Petroleum 44 is expected to generate 3.7 times more return on investment than NiSource. However, Occidental is 3.7 times more volatile than NiSource. It trades about 0.08 of its potential returns per unit of risk. NiSource is currently generating about 0.12 per unit of risk. If you would invest  7,674  in Occidental Petroleum 44 on October 8, 2024 and sell it today you would earn a total of  901.00  from holding Occidental Petroleum 44 or generate 11.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	70.97%
Values	Daily Returns

Occidental Petroleum 44  vs.  NiSource

Occidental Petroleum

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum 44 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Occidental sustained solid returns over the last few months and may actually be approaching a breakup point.

NiSource

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 9 (%) 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 February 2025.

Pair Trading with Occidental and NiSource

The main advantage of trading using opposite Occidental and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental 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 Occidental Petroleum 44 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.