Correlation Between Aris Water and Suburban Propane

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

By analyzing existing cross correlation between Aris Water Solutions and Suburban Propane Partners, you can compare the effects of market volatilities on Aris Water 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 Aris Water with a short position of Suburban Propane. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aris Water and Suburban Propane.

Diversification Opportunities for Aris Water and Suburban Propane

0.63

Correlation Coefficient

Aris Water  Suburban Propane

Poor diversification

The 3 months correlation between Aris and Suburban is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Aris Water Solutions 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 Aris Water 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 Aris Water Solutions 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 Aris Water i.e., Aris Water and Suburban Propane go up and down completely randomly.

Pair Corralation between Aris Water and Suburban Propane

Given the investment horizon of 90 days Aris Water Solutions is expected to generate 1.63 times more return on investment than Suburban Propane. However, Aris Water is 1.63 times more volatile than Suburban Propane Partners. It trades about 0.17 of its potential returns per unit of risk. Suburban Propane Partners is currently generating about 0.21 per unit of risk. If you would invest  2,384  in Aris Water Solutions on September 16, 2024 and sell it today you would earn a total of  197.00  from holding Aris Water Solutions or generate 8.26% return on investment over 90 days.

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

Aris Water Solutions  vs.  Suburban Propane Partners

Aris Water Solutions

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Water Solutions are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Aris Water unveiled solid returns over the last few months and may actually be approaching a breakup point.

Suburban Propane Partners

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Suburban Propane Partners are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Suburban Propane is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Aris Water and Suburban Propane

The main advantage of trading using opposite Aris Water and Suburban Propane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aris Water 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 Aris Water Solutions 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.