Correlation Between Suburban Propane and UGI
Can any of the company-specific risk be diversified away by investing in both Suburban Propane and UGI 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 UGI 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 UGI Corporation, you can compare the effects of market volatilities on Suburban Propane and UGI 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 UGI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suburban Propane and UGI.
Diversification Opportunities for Suburban Propane and UGI
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Suburban and UGI is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Suburban Propane Partners and UGI Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UGI Corporation 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 UGI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UGI Corporation has no effect on the direction of Suburban Propane i.e., Suburban Propane and UGI go up and down completely randomly.
Pair Corralation between Suburban Propane and UGI
Considering the 90-day investment horizon Suburban Propane is expected to generate 5.04 times less return on investment than UGI. But when comparing it to its historical volatility, Suburban Propane Partners is 1.48 times less risky than UGI. It trades about 0.06 of its potential returns per unit of risk. UGI Corporation is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,495 in UGI Corporation on August 27, 2024 and sell it today you would earn a total of 355.00 from holding UGI Corporation or generate 14.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Suburban Propane Partners vs. UGI Corp.
Performance |
| Timeline |
| Suburban Propane Partners |
| UGI Corporation |
Suburban Propane and UGI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Suburban Propane and UGI
The main advantage of trading using opposite Suburban Propane and UGI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suburban Propane position performs unexpectedly, UGI 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 UGI will offset losses from the drop in UGI's long position.The idea behind Suburban Propane Partners and UGI Corporation 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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