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

0.67

Correlation Coefficient

Suburban Propane  Archrock

Poor diversification

The 3 months correlation between Suburban and Archrock is 0.67. 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 3.76 times less return on investment than Archrock. But when comparing it to its historical volatility, Suburban Propane Partners is 1.32 times less risky than Archrock. It trades about 0.07 of its potential returns per unit of risk. Archrock is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,920  in Archrock on September 13, 2024 and sell it today you would earn a total of  649.00  from holding Archrock or generate 33.8% 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

Suburban Propane Partners

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Suburban Propane Partners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Suburban Propane may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 weak basic indicators, Archrock exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

The idea behind Suburban Propane Partners and Archrock 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.