Correlation Between NiSource and OPAL Fuels
Can any of the company-specific risk be diversified away by investing in both NiSource and OPAL Fuels 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 OPAL Fuels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NiSource and OPAL Fuels, you can compare the effects of market volatilities on NiSource and OPAL Fuels 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 OPAL Fuels. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource and OPAL Fuels.
Diversification Opportunities for NiSource and OPAL Fuels
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NiSource and OPAL is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and OPAL Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPAL Fuels 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 OPAL Fuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPAL Fuels has no effect on the direction of NiSource i.e., NiSource and OPAL Fuels go up and down completely randomly.
Pair Corralation between NiSource and OPAL Fuels
Allowing for the 90-day total investment horizon NiSource is expected to generate 0.38 times more return on investment than OPAL Fuels. However, NiSource is 2.66 times less risky than OPAL Fuels. It trades about 0.07 of its potential returns per unit of risk. OPAL Fuels is currently generating about -0.04 per unit of risk. If you would invest 2,589 in NiSource on August 27, 2024 and sell it today you would earn a total of 1,182 from holding NiSource or generate 45.65% 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. OPAL Fuels
Performance |
| Timeline |
| NiSource |
| OPAL Fuels |
NiSource and OPAL Fuels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NiSource and OPAL Fuels
The main advantage of trading using opposite NiSource and OPAL Fuels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource position performs unexpectedly, OPAL Fuels 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 OPAL Fuels will offset losses from the drop in OPAL Fuels' long position.| NiSource vs. NorthWestern | NiSource vs. Avista | NiSource vs. Otter Tail | NiSource vs. Companhia Paranaense de |
| OPAL Fuels vs. Northwest Natural Gas | OPAL Fuels vs. Chesapeake Utilities | OPAL Fuels vs. One Gas | OPAL Fuels vs. NewJersey Resources |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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