Correlation Between NiSource and Vodka Brands

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

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

Diversification Opportunities for NiSource and Vodka Brands

0.5

Correlation Coefficient

NiSource  Vodka Brands

Very weak diversification

The 3 months correlation between NiSource and Vodka is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Vodka Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodka Brands 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 Vodka Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodka Brands Corp has no effect on the direction of NiSource i.e., NiSource and Vodka Brands go up and down completely randomly.

Pair Corralation between NiSource and Vodka Brands

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.96 times more return on investment than Vodka Brands. However, NiSource is 1.04 times less risky than Vodka Brands. It trades about -0.2 of its potential returns per unit of risk. Vodka Brands Corp is currently generating about -0.21 per unit of risk. If you would invest  3,825  in NiSource on September 28, 2024 and sell it today you would lose (140.00) from holding NiSource or give up 3.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

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

Vodka Brands Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Vodka Brands Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, Vodka Brands 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 Vodka Brands

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

The idea behind NiSource and Vodka Brands 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.