Correlation Between NiSource and NorthWestern
Can any of the company-specific risk be diversified away by investing in both NiSource and NorthWestern 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 NorthWestern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NiSource and NorthWestern, you can compare the effects of market volatilities on NiSource and NorthWestern 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 NorthWestern. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource and NorthWestern.
Diversification Opportunities for NiSource and NorthWestern
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NiSource and NorthWestern is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and NorthWestern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWestern 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 NorthWestern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthWestern has no effect on the direction of NiSource i.e., NiSource and NorthWestern go up and down completely randomly.
Pair Corralation between NiSource and NorthWestern
Allowing for the 90-day total investment horizon NiSource is expected to generate 0.96 times more return on investment than NorthWestern. However, NiSource is 1.04 times less risky than NorthWestern. It trades about 0.07 of its potential returns per unit of risk. NorthWestern is currently generating about 0.02 per unit of risk. If you would invest 2,558 in NiSource on August 26, 2024 and sell it today you would earn a total of 1,213 from holding NiSource or generate 47.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NiSource vs. NorthWestern
Performance |
| Timeline |
| NiSource |
| NorthWestern |
NiSource and NorthWestern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NiSource and NorthWestern
The main advantage of trading using opposite NiSource and NorthWestern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource position performs unexpectedly, NorthWestern 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 NorthWestern will offset losses from the drop in NorthWestern's long position.| NiSource vs. NewJersey Resources | NiSource vs. Northwest Natural Gas | NiSource vs. UGI Corporation | NiSource vs. Spire Inc |
| NorthWestern vs. Allete Inc | NorthWestern vs. Black Hills | NorthWestern vs. Otter Tail | NorthWestern vs. Avista |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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