Correlation Between National Beverage and Suburban Propane
Can any of the company-specific risk be diversified away by investing in both National Beverage and Suburban Propane 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 National Beverage and Suburban Propane into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Beverage Corp and Suburban Propane Partners, you can compare the effects of market volatilities on National Beverage and Suburban Propane 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 National Beverage with a short position of Suburban Propane. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Suburban Propane.
Diversification Opportunities for National Beverage and Suburban Propane
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Suburban is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Suburban Propane Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suburban Propane Partners and National Beverage 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 National Beverage Corp are associated (or correlated) with Suburban Propane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suburban Propane Partners has no effect on the direction of National Beverage i.e., National Beverage and Suburban Propane go up and down completely randomly.
Pair Corralation between National Beverage and Suburban Propane
Given the investment horizon of 90 days National Beverage is expected to generate 2.71 times less return on investment than Suburban Propane. But when comparing it to its historical volatility, National Beverage Corp is 1.05 times less risky than Suburban Propane. It trades about 0.03 of its potential returns per unit of risk. Suburban Propane Partners is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,346 in Suburban Propane Partners on September 2, 2024 and sell it today you would earn a total of 639.00 from holding Suburban Propane Partners or generate 47.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Beverage Corp vs. Suburban Propane Partners
Performance |
| Timeline |
| National Beverage Corp |
| Suburban Propane Partners |
National Beverage and Suburban Propane Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and Suburban Propane
The main advantage of trading using opposite National Beverage and Suburban Propane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage position performs unexpectedly, Suburban Propane 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 Suburban Propane will offset losses from the drop in Suburban Propane's long position.The idea behind National Beverage Corp and Suburban Propane Partners 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.| Suburban Propane vs. Northwest Natural Gas | Suburban Propane vs. Atmos Energy | Suburban Propane vs. One Gas | Suburban Propane vs. NiSource |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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