Correlation Between NiSource and One Gas

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

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

Diversification Opportunities for NiSource and One Gas

0.35

Correlation Coefficient

NiSource  One Gas

Weak diversification

The 3 months correlation between NiSource and One is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and One Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Gas 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 One Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Gas has no effect on the direction of NiSource i.e., NiSource and One Gas go up and down completely randomly.

Pair Corralation between NiSource and One Gas

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.78 times more return on investment than One Gas. However, NiSource is 1.29 times less risky than One Gas. It trades about 0.12 of its potential returns per unit of risk. One Gas is currently generating about 0.01 per unit of risk. If you would invest  2,611  in NiSource on March 14, 2024 and sell it today you would earn a total of  206.00  from holding NiSource or generate 7.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

NiSource  vs.  One Gas

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 unsteady forward indicators, NiSource may actually be approaching a critical reversion point that can send shares even higher in July 2024.

One Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days One Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, One Gas is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NiSource and One Gas

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

The idea behind NiSource and One Gas 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.