Correlation Between NiSource and Consolidated Edison
Can any of the company-specific risk be diversified away by investing in both NiSource and Consolidated Edison 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 Consolidated Edison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NiSource and Consolidated Edison, you can compare the effects of market volatilities on NiSource and Consolidated Edison 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 Consolidated Edison. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource and Consolidated Edison.
Diversification Opportunities for NiSource and Consolidated Edison
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NiSource and Consolidated is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Consolidated Edison in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Edison 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 Consolidated Edison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Edison has no effect on the direction of NiSource i.e., NiSource and Consolidated Edison go up and down completely randomly.
Pair Corralation between NiSource and Consolidated Edison
Allowing for the 90-day total investment horizon NiSource is expected to generate 0.97 times more return on investment than Consolidated Edison. However, NiSource is 1.03 times less risky than Consolidated Edison. It trades about 0.17 of its potential returns per unit of risk. Consolidated Edison is currently generating about 0.05 per unit of risk. If you would invest 2,474 in NiSource on August 26, 2024 and sell it today you would earn a total of 1,297 from holding NiSource or generate 52.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NiSource vs. Consolidated Edison
Performance |
| Timeline |
| NiSource |
| Consolidated Edison |
NiSource and Consolidated Edison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NiSource and Consolidated Edison
The main advantage of trading using opposite NiSource and Consolidated Edison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource position performs unexpectedly, Consolidated Edison 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 Consolidated Edison will offset losses from the drop in Consolidated Edison's long position.| NiSource vs. NewJersey Resources | NiSource vs. Northwest Natural Gas | NiSource vs. UGI Corporation | NiSource vs. Spire Inc |
| Consolidated Edison vs. Duke Energy | Consolidated Edison vs. Dominion Energy | Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera Energy |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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