Correlation Between NiSource and CenterPoint Energy

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

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

Diversification Opportunities for NiSource and CenterPoint Energy

0.57

Correlation Coefficient

NiSource  CenterPoint Energy

Very weak diversification

The 3 months correlation between NiSource and CenterPoint is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding NiSource and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy 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 CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of NiSource i.e., NiSource and CenterPoint Energy go up and down completely randomly.

Pair Corralation between NiSource and CenterPoint Energy

Assuming the 90 days horizon NiSource is expected to generate 0.75 times more return on investment than CenterPoint Energy. However, NiSource is 1.34 times less risky than CenterPoint Energy. It trades about 0.03 of its potential returns per unit of risk. CenterPoint Energy is currently generating about 0.0 per unit of risk. If you would invest  3,455  in NiSource on April 24, 2025 and sell it today you would earn a total of  65.00  from holding NiSource or generate 1.88% return on investment over 90 days.

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

NiSource  vs.  CenterPoint Energy

NiSource

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 2 (%) 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.

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NiSource and CenterPoint Energy

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

The idea behind NiSource and CenterPoint Energy 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.