Correlation Between Archrock and Suburban Propane

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

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

Diversification Opportunities for Archrock and Suburban Propane

0.67

Correlation Coefficient

Archrock  Suburban Propane

Poor diversification

The 3 months correlation between Archrock and Suburban is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Archrock 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 Archrock 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 Archrock 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 Archrock i.e., Archrock and Suburban Propane go up and down completely randomly.

Pair Corralation between Archrock and Suburban Propane

Given the investment horizon of 90 days Archrock is expected to generate 1.34 times more return on investment than Suburban Propane. However, Archrock is 1.34 times more volatile than Suburban Propane Partners. It trades about 0.21 of its potential returns per unit of risk. Suburban Propane Partners is currently generating about 0.13 per unit of risk. If you would invest  1,921  in Archrock on September 5, 2024 and sell it today you would earn a total of  671.00  from holding Archrock or generate 34.93% return on investment over 90 days.

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

Archrock  vs.  Suburban Propane Partners

Archrock

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Archrock are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Archrock exhibited solid returns over the last few months and may actually be approaching a breakup point.

Suburban Propane Partners

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suburban Propane Partners are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Suburban Propane demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Archrock and Suburban Propane

The main advantage of trading using opposite Archrock and Suburban Propane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archrock 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 Archrock 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.