Correlation Between NiSource and Allete
Can any of the company-specific risk be diversified away by investing in both NiSource and Allete 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 Allete into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NiSource and Allete Inc, you can compare the effects of market volatilities on NiSource and Allete 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 Allete. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource and Allete.
Diversification Opportunities for NiSource and Allete
Almost no diversification
The 3 months correlation between NiSource and Allete is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Allete Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allete Inc 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 Allete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allete Inc has no effect on the direction of NiSource i.e., NiSource and Allete go up and down completely randomly.
Pair Corralation between NiSource and Allete
Allowing for the 90-day total investment horizon NiSource is expected to generate 0.97 times more return on investment than Allete. However, NiSource is 1.03 times less risky than Allete. It trades about 0.08 of its potential returns per unit of risk. Allete Inc is currently generating about 0.02 per unit of risk. If you would invest 2,547 in NiSource on August 30, 2024 and sell it today you would earn a total of 1,278 from holding NiSource or generate 50.18% 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. Allete Inc
Performance |
| Timeline |
| NiSource |
| Allete Inc |
NiSource and Allete Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NiSource and Allete
The main advantage of trading using opposite NiSource and Allete positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource position performs unexpectedly, Allete 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 Allete will offset losses from the drop in Allete's long position.| NiSource vs. NewJersey Resources | NiSource vs. Northwest Natural Gas | NiSource vs. UGI Corporation | NiSource vs. Spire Inc |
| Allete vs. Avista | Allete vs. Black Hills | Allete vs. Montauk Renewables | Allete vs. Companhia Paranaense de |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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