Correlation Between NiSource and Black Hills
Can any of the company-specific risk be diversified away by investing in both NiSource and Black Hills 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 Black Hills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NiSource and Black Hills, you can compare the effects of market volatilities on NiSource and Black Hills 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 Black Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource and Black Hills.
Diversification Opportunities for NiSource and Black Hills
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NiSource and Black is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills 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 Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of NiSource i.e., NiSource and Black Hills go up and down completely randomly.
Pair Corralation between NiSource and Black Hills
Allowing for the 90-day total investment horizon NiSource is expected to generate 0.73 times more return on investment than Black Hills. However, NiSource is 1.37 times less risky than Black Hills. It trades about 0.51 of its potential returns per unit of risk. Black Hills is currently generating about 0.24 per unit of risk. 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 |
NiSource vs. Black Hills
Performance |
| Timeline |
| NiSource |
| Black Hills |
NiSource and Black Hills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NiSource and Black Hills
The main advantage of trading using opposite NiSource and Black Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource position performs unexpectedly, Black Hills 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 Black Hills will offset losses from the drop in Black Hills' long position.| NiSource vs. NewJersey Resources | NiSource vs. Northwest Natural Gas | NiSource vs. UGI Corporation | NiSource vs. Spire Inc |
| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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