Correlation Between NiSource and Duke Energy

Can any of the company-specific risk be diversified away by investing in both NiSource and Duke 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 Duke Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NiSource and Duke Energy Corp, you can compare the effects of market volatilities on NiSource and Duke 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 Duke Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NiSource and Duke Energy.

Diversification Opportunities for NiSource and Duke Energy

-0.68

Correlation Coefficient

NiSource  Duke Energy

Excellent diversification

The 3 months correlation between NiSource and Duke is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Duke Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy Corp 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 Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy Corp has no effect on the direction of NiSource i.e., NiSource and Duke Energy go up and down completely randomly.

Pair Corralation between NiSource and Duke Energy

Allowing for the 90-day total investment horizon NiSource is expected to generate 2.24 times more return on investment than Duke Energy. However, NiSource is 2.24 times more volatile than Duke Energy Corp. It trades about 0.13 of its potential returns per unit of risk. Duke Energy Corp is currently generating about -0.09 per unit of risk. If you would invest  3,412  in NiSource on September 27, 2024 and sell it today you would earn a total of  274.00  from holding NiSource or generate 8.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

NiSource  vs.  Duke Energy Corp

NiSource

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, NiSource may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Duke Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duke Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, Duke Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NiSource and Duke Energy

The main advantage of trading using opposite NiSource and Duke Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NiSource position performs unexpectedly, Duke 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 Duke Energy will offset losses from the drop in Duke Energy's long position.

The idea behind NiSource and Duke Energy Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.