Correlation Between Suburban Propane and Archrock
Can any of the company-specific risk be diversified away by investing in both Suburban Propane and Archrock 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 Suburban Propane and Archrock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Suburban Propane Partners and Archrock, you can compare the effects of market volatilities on Suburban Propane and Archrock 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 Suburban Propane with a short position of Archrock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suburban Propane and Archrock.
Diversification Opportunities for Suburban Propane and Archrock
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Suburban and Archrock is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Suburban Propane Partners and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and Suburban Propane 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 Suburban Propane Partners are associated (or correlated) with Archrock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archrock has no effect on the direction of Suburban Propane i.e., Suburban Propane and Archrock go up and down completely randomly.
Pair Corralation between Suburban Propane and Archrock
Considering the 90-day investment horizon Suburban Propane is expected to generate 2.68 times less return on investment than Archrock. But when comparing it to its historical volatility, Suburban Propane Partners is 1.35 times less risky than Archrock. It trades about 0.19 of its potential returns per unit of risk. Archrock is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 2,002 in Archrock on September 3, 2024 and sell it today you would earn a total of 560.00 from holding Archrock or generate 27.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Suburban Propane Partners vs. Archrock
Performance |
| Timeline |
| Suburban Propane Partners |
| Archrock |
Suburban Propane and Archrock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Suburban Propane and Archrock
The main advantage of trading using opposite Suburban Propane and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suburban Propane position performs unexpectedly, Archrock 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 Archrock will offset losses from the drop in Archrock's long position.| Suburban Propane vs. Northwest Natural Gas | Suburban Propane vs. NewJersey Resources | Suburban Propane vs. Atmos Energy | Suburban Propane vs. Chesapeake Utilities |
| Archrock vs. ProPetro Holding Corp | Archrock vs. Select Energy Services | Archrock vs. USA Compression Partners | Archrock vs. Par Pacific Holdings |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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