Correlation Between CenterPoint Energy and NiSource

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

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

Diversification Opportunities for CenterPoint Energy and NiSource

0.64

Correlation Coefficient

CenterPoint Energy  NiSource

Poor diversification

The 3 months correlation between CenterPoint and NiSource is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource and CenterPoint Energy 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 CenterPoint Energy 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 CenterPoint Energy i.e., CenterPoint Energy and NiSource go up and down completely randomly.

Pair Corralation between CenterPoint Energy and NiSource

Assuming the 90 days horizon CenterPoint Energy is expected to under-perform the NiSource. In addition to that, CenterPoint Energy is 1.34 times more volatile than NiSource. It trades about -0.02 of its total potential returns per unit of risk. NiSource is currently generating about 0.05 per unit of volatility. If you would invest  3,435  in NiSource on April 23, 2025 and sell it today you would earn a total of  125.00  from holding NiSource or generate 3.64% return on investment over 90 days.

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

CenterPoint Energy  vs.  NiSource

CenterPoint Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days CenterPoint Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CenterPoint Energy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

NiSource

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NiSource is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CenterPoint Energy and NiSource

The main advantage of trading using opposite CenterPoint Energy and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy 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 CenterPoint Energy 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.