Correlation Between NiSource and Kinetik Holdings

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

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

Diversification Opportunities for NiSource and Kinetik Holdings

0.92

Correlation Coefficient

NiSource  Kinetik Holdings

Almost no diversification

The 3 months correlation between NiSource and Kinetik is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Kinetik Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetik Holdings 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 Kinetik Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetik Holdings has no effect on the direction of NiSource i.e., NiSource and Kinetik Holdings go up and down completely randomly.

Pair Corralation between NiSource and Kinetik Holdings

Allowing for the 90-day total investment horizon NiSource is expected to generate 3.38 times less return on investment than Kinetik Holdings. But when comparing it to its historical volatility, NiSource is 2.12 times less risky than Kinetik Holdings. It trades about 0.12 of its potential returns per unit of risk. Kinetik Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,420  in Kinetik Holdings on September 27, 2024 and sell it today you would earn a total of  1,264  from holding Kinetik Holdings or generate 28.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

NiSource  vs.  Kinetik Holdings

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 unsteady forward indicators, NiSource may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kinetik Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetik Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Kinetik Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NiSource and Kinetik Holdings

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

The idea behind NiSource and Kinetik Holdings 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.