Correlation Between Beijing Gas and NiSource
Can any of the company-specific risk be diversified away by investing in both Beijing Gas 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 Beijing Gas and NiSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beijing Gas Blue and NiSource, you can compare the effects of market volatilities on Beijing Gas 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 Beijing Gas with a short position of NiSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Gas and NiSource.
Diversification Opportunities for Beijing Gas and NiSource
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Beijing and NiSource is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Gas Blue and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource and Beijing Gas 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 Beijing Gas Blue 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 Beijing Gas i.e., Beijing Gas and NiSource go up and down completely randomly.
Pair Corralation between Beijing Gas and NiSource
Assuming the 90 days horizon Beijing Gas Blue is expected to generate 57.92 times more return on investment than NiSource. However, Beijing Gas is 57.92 times more volatile than NiSource. It trades about 0.08 of its potential returns per unit of risk. NiSource is currently generating about 0.15 per unit of risk. If you would invest 0.33 in Beijing Gas Blue on September 12, 2024 and sell it today you would earn a total of 0.08 from holding Beijing Gas Blue or generate 24.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Beijing Gas Blue vs. NiSource
Performance |
| Timeline |
| Beijing Gas Blue |
| NiSource |
Beijing Gas and NiSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beijing Gas and NiSource
The main advantage of trading using opposite Beijing Gas and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Gas 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.| Beijing Gas vs. NiSource | Beijing Gas vs. NewJersey Resources | Beijing Gas vs. Northwest Natural Gas | Beijing Gas vs. UGI Corporation |
| NiSource vs. NewJersey Resources | NiSource vs. Northwest Natural Gas | NiSource vs. UGI Corporation | NiSource vs. Spire Inc |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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