Correlation Between Vodka Brands and NiSource

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

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

Diversification Opportunities for Vodka Brands and NiSource

0.5

Correlation Coefficient

Vodka Brands  NiSource

Very weak diversification

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

Pair Corralation between Vodka Brands and NiSource

Given the investment horizon of 90 days Vodka Brands Corp is expected to under-perform the NiSource. In addition to that, Vodka Brands is 1.1 times more volatile than NiSource. It trades about -0.21 of its total potential returns per unit of risk. NiSource is currently generating about -0.19 per unit of volatility. If you would invest  3,825  in NiSource on September 27, 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	100.0%
Values	Daily Returns

Vodka Brands Corp  vs.  NiSource

Vodka Brands Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vodka Brands Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

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.

Pair Trading with Vodka Brands and NiSource

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

The idea behind Vodka Brands Corp and NiSource 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.