Correlation Between NiSource and Atmos Energy

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

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

Diversification Opportunities for NiSource and Atmos Energy

0.92

Correlation Coefficient

NiSource  Atmos Energy

Almost no diversification

The 3 months correlation between NiSource and Atmos is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy 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 are associated (or correlated) with Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of NiSource i.e., NiSource and Atmos Energy go up and down completely randomly.

Pair Corralation between NiSource and Atmos Energy

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.86 times more return on investment than Atmos Energy. However, NiSource is 1.16 times less risky than Atmos Energy. It trades about 0.36 of its potential returns per unit of risk. Atmos Energy is currently generating about 0.13 per unit of risk. If you would invest  2,681  in NiSource on February 12, 2024 and sell it today you would earn a total of  187.00  from holding NiSource or generate 6.98% return on investment over 90 days.

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

NiSource  vs.  Atmos Energy

NiSource

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 17 (%) 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 June 2024.

Atmos Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atmos Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Atmos Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NiSource and Atmos Energy

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

The idea behind NiSource and Atmos Energy 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.