Correlation Between WEC Energy and NiSource

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

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

Diversification Opportunities for WEC Energy and NiSource

0.76

Correlation Coefficient

WEC Energy  NiSource

Poor diversification

The 3 months correlation between WEC and NiSource is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource and WEC Energy 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 WEC Energy Group 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 WEC Energy i.e., WEC Energy and NiSource go up and down completely randomly.

Pair Corralation between WEC Energy and NiSource

Considering the 90-day investment horizon WEC Energy Group is expected to under-perform the NiSource. But the stock apears to be less risky and, when comparing its historical volatility, WEC Energy Group is 1.09 times less risky than NiSource. The stock trades about -0.44 of its potential returns per unit of risk. The NiSource is currently generating about -0.27 of returns per unit of risk over similar time horizon. If you would invest  3,795  in NiSource on September 24, 2024 and sell it today you would lose (178.00) from holding NiSource or give up 4.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

WEC Energy Group  vs.  NiSource

WEC Energy Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WEC Energy Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, WEC Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

NiSource

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, NiSource may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WEC Energy and NiSource

The main advantage of trading using opposite WEC Energy and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEC Energy 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 WEC Energy Group 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.