Correlation Between NiSource and Nu Holdings

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

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

Diversification Opportunities for NiSource and Nu Holdings

0.2

Correlation Coefficient

NiSource  Nu Holdings

Modest diversification

The 3 months correlation between NiSource and Nu Holdings is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and Nu Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nu 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 Nu Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nu Holdings has no effect on the direction of NiSource i.e., NiSource and Nu Holdings go up and down completely randomly.

Pair Corralation between NiSource and Nu Holdings

Allowing for the 90-day total investment horizon NiSource is expected to generate 0.45 times more return on investment than Nu Holdings. However, NiSource is 2.2 times less risky than Nu Holdings. It trades about 0.17 of its potential returns per unit of risk. Nu Holdings is currently generating about 0.06 per unit of risk. If you would invest  2,634  in NiSource on March 5, 2024 and sell it today you would earn a total of  272.00  from holding NiSource or generate 10.33% return on investment over 90 days.

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

NiSource  vs.  Nu Holdings

NiSource

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 13 (%) 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 July 2024.

Nu Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nu Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Nu Holdings may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with NiSource and Nu Holdings

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

The idea behind NiSource and Nu 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.