Correlation Between Northwest Natural and Suburban Propane

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

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

Diversification Opportunities for Northwest Natural and Suburban Propane

0.76

Correlation Coefficient

Northwest Natural  Suburban Propane

Poor diversification

The 3 months correlation between Northwest and Suburban is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Northwest Natural Gas 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 Northwest Natural 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 Northwest Natural Gas 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 Northwest Natural i.e., Northwest Natural and Suburban Propane go up and down completely randomly.

Pair Corralation between Northwest Natural and Suburban Propane

Considering the 90-day investment horizon Northwest Natural is expected to generate 2.56 times less return on investment than Suburban Propane. But when comparing it to its historical volatility, Northwest Natural Gas is 1.33 times less risky than Suburban Propane. It trades about 0.12 of its potential returns per unit of risk. Suburban Propane Partners is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,675  in Suburban Propane Partners on December 29, 2024 and sell it today you would earn a total of  451.00  from holding Suburban Propane Partners or generate 26.93% return on investment over 90 days.

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

Northwest Natural Gas  vs.  Suburban Propane Partners

Northwest Natural Gas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northwest Natural Gas are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Northwest Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Suburban Propane Partners

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Suburban Propane Partners are ranked lower than 18 (%) 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 Northwest Natural and Suburban Propane

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

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.