Correlation Between NiSource and UGI

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

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

Diversification Opportunities for NiSource and UGI

0.66

Correlation Coefficient

NiSource  UGI

Poor diversification

The 3 months correlation between NiSource and UGI is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and UGI Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UGI Corporation 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 UGI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UGI Corporation has no effect on the direction of NiSource i.e., NiSource and UGI go up and down completely randomly.

Pair Corralation between NiSource and UGI

Allowing for the 90-day total investment horizon NiSource is expected to generate 3.58 times less return on investment than UGI. But when comparing it to its historical volatility, NiSource is 3.54 times less risky than UGI. It trades about 0.29 of its potential returns per unit of risk. UGI Corporation is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  2,335  in UGI Corporation on September 5, 2024 and sell it today you would earn a total of  579.00  from holding UGI Corporation or generate 24.8% return on investment over 90 days.

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

NiSource  vs.  UGI Corp.

NiSource

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 14 (%) 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.

UGI Corporation

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UGI Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, UGI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NiSource and UGI

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

The idea behind NiSource and UGI Corporation 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.