Correlation Between Pure Cycle and Suburban Propane

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

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

Diversification Opportunities for Pure Cycle and Suburban Propane

0.34

Correlation Coefficient

Pure Cycle  Suburban Propane

Weak diversification

The 3 months correlation between Pure and Suburban is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Pure Cycle 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 Pure Cycle 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 Pure Cycle 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 Pure Cycle i.e., Pure Cycle and Suburban Propane go up and down completely randomly.

Pair Corralation between Pure Cycle and Suburban Propane

Given the investment horizon of 90 days Pure Cycle is expected to under-perform the Suburban Propane. In addition to that, Pure Cycle is 1.73 times more volatile than Suburban Propane Partners. It trades about -0.29 of its total potential returns per unit of risk. Suburban Propane Partners is currently generating about -0.17 per unit of volatility. If you would invest  1,885  in Suburban Propane Partners on October 12, 2024 and sell it today you would lose (98.00) from holding Suburban Propane Partners or give up 5.2% of portfolio value over 90 days.

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

Pure Cycle  vs.  Suburban Propane Partners

Pure Cycle

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Cycle are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Pure Cycle displayed solid returns over the last few months and may actually be approaching a breakup point.

Suburban Propane Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suburban Propane Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Suburban Propane is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Pure Cycle and Suburban Propane

The main advantage of trading using opposite Pure Cycle and Suburban Propane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pure Cycle 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 Pure Cycle 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..