Correlation Between NiSource and CenterPoint Energy
Can any of the company-specific risk be diversified away by investing in both NiSource and CenterPoint Energy 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 CenterPoint Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NiSource and CenterPoint Energy, you can compare the effects of market volatilities on NiSource and CenterPoint Energy 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 CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource and CenterPoint Energy.
Diversification Opportunities for NiSource and CenterPoint Energy
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NiSource and CenterPoint is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy 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 CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of NiSource i.e., NiSource and CenterPoint Energy go up and down completely randomly.
Pair Corralation between NiSource and CenterPoint Energy
Allowing for the 90-day total investment horizon NiSource is expected to generate 1.24 times less return on investment than CenterPoint Energy. But when comparing it to its historical volatility, NiSource is 1.14 times less risky than CenterPoint Energy. It trades about 0.12 of its potential returns per unit of risk. CenterPoint Energy is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,955 in CenterPoint Energy on October 26, 2024 and sell it today you would earn a total of 289.00 from holding CenterPoint Energy or generate 9.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NiSource vs. CenterPoint Energy
Performance |
| Timeline |
| NiSource |
| CenterPoint Energy |
NiSource and CenterPoint Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NiSource and CenterPoint Energy
The main advantage of trading using opposite NiSource and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource position performs unexpectedly, CenterPoint Energy 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 CenterPoint Energy will offset losses from the drop in CenterPoint Energy's long position.| NiSource vs. NewJersey Resources | NiSource vs. Northwest Natural Gas | NiSource vs. UGI Corporation | NiSource vs. Spire Inc |
| CenterPoint Energy vs. DTE Energy | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Ameren Corp | CenterPoint Energy vs. Pinnacle West Capital |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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