Correlation Between NiSource and Air Products
Can any of the company-specific risk be diversified away by investing in both NiSource and Air Products 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 Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NiSource and Air Products and, you can compare the effects of market volatilities on NiSource and Air Products 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 Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource and Air Products.
Diversification Opportunities for NiSource and Air Products
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NiSource and Air is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of NiSource i.e., NiSource and Air Products go up and down completely randomly.
Pair Corralation between NiSource and Air Products
Allowing for the 90-day total investment horizon NiSource is expected to generate 0.66 times more return on investment than Air Products. However, NiSource is 1.51 times less risky than Air Products. It trades about 0.1 of its potential returns per unit of risk. Air Products and is currently generating about 0.04 per unit of risk. If you would invest 2,588 in NiSource on August 31, 2024 and sell it today you would earn a total of 1,221 from holding NiSource or generate 47.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NiSource vs. Air Products and
Performance |
| Timeline |
| NiSource |
| Air Products |
NiSource and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NiSource and Air Products
The main advantage of trading using opposite NiSource and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.| NiSource vs. NewJersey Resources | NiSource vs. Northwest Natural Gas | NiSource vs. UGI Corporation | NiSource vs. Spire Inc |
| Air Products vs. Eastman Chemical | Air Products vs. Linde plc Ordinary | Air Products vs. Ecolab Inc | Air Products vs. Sherwin Williams Co |
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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