Correlation Between NiSource and United Guardian

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

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

Diversification Opportunities for NiSource and United Guardian

-0.87

Correlation Coefficient

NiSource  United Guardian

Pay attention - limited upside

The 3 months correlation between NiSource and United is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of NiSource i.e., NiSource and United Guardian go up and down completely randomly.

Pair Corralation between NiSource and United Guardian

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.25 times more return on investment than United Guardian. However, NiSource is 3.97 times less risky than United Guardian. It trades about 0.14 of its potential returns per unit of risk. United Guardian is currently generating about -0.14 per unit of risk. If you would invest  3,380  in NiSource on September 13, 2024 and sell it today you would earn a total of  281.00  from holding NiSource or generate 8.31% return on investment over 90 days.

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

NiSource  vs.  United Guardian

NiSource

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 10 (%) 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.

United Guardian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Guardian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NiSource and United Guardian

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

The idea behind NiSource and United Guardian 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.