Correlation Between NiSource and Prudential Utility
Can any of the company-specific risk be diversified away by investing in both NiSource and Prudential Utility 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 Prudential Utility into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NiSource and Prudential Utility Fund, you can compare the effects of market volatilities on NiSource and Prudential Utility 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 Prudential Utility. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource and Prudential Utility.
Diversification Opportunities for NiSource and Prudential Utility
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NiSource and Prudential is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Prudential Utility Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Utility 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 Prudential Utility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Utility has no effect on the direction of NiSource i.e., NiSource and Prudential Utility go up and down completely randomly.
Pair Corralation between NiSource and Prudential Utility
Allowing for the 90-day total investment horizon NiSource is expected to generate 0.97 times more return on investment than Prudential Utility. However, NiSource is 1.03 times less risky than Prudential Utility. It trades about 0.27 of its potential returns per unit of risk. Prudential Utility Fund is currently generating about 0.15 per unit of risk. If you would invest 2,815 in NiSource on September 1, 2024 and sell it today you would earn a total of 994.00 from holding NiSource or generate 35.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
NiSource vs. Prudential Utility Fund
Performance |
| Timeline |
| NiSource |
| Prudential Utility |
NiSource and Prudential Utility Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NiSource and Prudential Utility
The main advantage of trading using opposite NiSource and Prudential Utility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource position performs unexpectedly, Prudential Utility 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 Prudential Utility will offset losses from the drop in Prudential Utility's long position.| NiSource vs. NorthWestern | NiSource vs. Avista | NiSource vs. Otter Tail | NiSource vs. Companhia Paranaense de |
| Prudential Utility vs. Prudential Health Sciences | Prudential Utility vs. Pgim Jennison Natural | Prudential Utility vs. Prudential Utility Fund | Prudential Utility vs. Prudential Utility Fund |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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