Correlation Between SBC Medical and Suburban Propane

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

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

Diversification Opportunities for SBC Medical and Suburban Propane

0.58

Correlation Coefficient

SBC Medical  Suburban Propane

Very weak diversification

The 3 months correlation between SBC and Suburban is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SBC Medical Group 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 SBC Medical 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 SBC Medical Group 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 SBC Medical i.e., SBC Medical and Suburban Propane go up and down completely randomly.

Pair Corralation between SBC Medical and Suburban Propane

Assuming the 90 days horizon SBC Medical Group is expected to generate 3.78 times more return on investment than Suburban Propane. However, SBC Medical is 3.78 times more volatile than Suburban Propane Partners. It trades about 0.06 of its potential returns per unit of risk. Suburban Propane Partners is currently generating about -0.12 per unit of risk. If you would invest  26.00  in SBC Medical Group on September 22, 2024 and sell it today you would earn a total of  1.00  from holding SBC Medical Group or generate 3.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

SBC Medical Group  vs.  Suburban Propane Partners

SBC Medical Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBC Medical Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, SBC Medical showed 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 SBC Medical and Suburban Propane

The main advantage of trading using opposite SBC Medical and Suburban Propane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBC Medical 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 SBC Medical Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.