Correlation Between Black Hills and NiSource
Can any of the company-specific risk be diversified away by investing in both Black Hills 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 Black Hills and NiSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and NiSource, you can compare the effects of market volatilities on Black Hills 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 Black Hills with a short position of NiSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and NiSource.
Diversification Opportunities for Black Hills and NiSource
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Black and NiSource is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource and Black Hills 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 Black Hills 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 Black Hills i.e., Black Hills and NiSource go up and down completely randomly.
Pair Corralation between Black Hills and NiSource
Considering the 90-day investment horizon Black Hills is expected to generate 1.55 times less return on investment than NiSource. In addition to that, Black Hills is 1.37 times more volatile than NiSource. It trades about 0.24 of its total potential returns per unit of risk. NiSource is currently generating about 0.51 per unit of volatility. If you would invest 3,416 in NiSource on August 30, 2024 and sell it today you would earn a total of 409.00 from holding NiSource or generate 11.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Black Hills vs. NiSource
Performance |
| Timeline |
| Black Hills |
| NiSource |
Black Hills and NiSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and NiSource
The main advantage of trading using opposite Black Hills and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills 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.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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