Correlation Between Suburban Propane and Marine Products

Can any of the company-specific risk be diversified away by investing in both Suburban Propane and Marine Products 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 Marine Products 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 Marine Products, you can compare the effects of market volatilities on Suburban Propane and Marine Products 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 Marine Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suburban Propane and Marine Products.

Diversification Opportunities for Suburban Propane and Marine Products

0.54

Correlation Coefficient

Suburban Propane  Marine Products

Very weak diversification

The 3 months correlation between Suburban and Marine is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Suburban Propane Partners and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products 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 Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of Suburban Propane i.e., Suburban Propane and Marine Products go up and down completely randomly.

Pair Corralation between Suburban Propane and Marine Products

Considering the 90-day investment horizon Suburban Propane Partners is expected to under-perform the Marine Products. But the stock apears to be less risky and, when comparing its historical volatility, Suburban Propane Partners is 1.22 times less risky than Marine Products. The stock trades about -0.02 of its potential returns per unit of risk. The Marine Products is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,029  in Marine Products on September 24, 2024 and sell it today you would lose (95.00) from holding Marine Products or give up 9.23% of portfolio value over 90 days.

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

Suburban Propane Partners  vs.  Marine Products

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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Marine Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marine Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Suburban Propane and Marine Products

The main advantage of trading using opposite Suburban Propane and Marine Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suburban Propane position performs unexpectedly, Marine Products 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 Marine Products will offset losses from the drop in Marine Products' long position.

The idea behind Suburban Propane Partners and Marine Products 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.