Correlation Between Suburban Propane and Northwest Natural

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

Diversification Opportunities for Suburban Propane and Northwest Natural

0.76

Correlation Coefficient

Suburban Propane  Northwest Natural

Poor diversification

The 3 months correlation between Suburban and Northwest is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Suburban Propane Partners and Northwest Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Natural Gas 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 Northwest Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Natural Gas has no effect on the direction of Suburban Propane i.e., Suburban Propane and Northwest Natural go up and down completely randomly.

Pair Corralation between Suburban Propane and Northwest Natural

Considering the 90-day investment horizon Suburban Propane Partners is expected to generate 1.33 times more return on investment than Northwest Natural. However, Suburban Propane is 1.33 times more volatile than Northwest Natural Gas. It trades about 0.24 of its potential returns per unit of risk. Northwest Natural Gas is currently generating about 0.12 per unit of risk. If you would invest  1,675  in Suburban Propane Partners on December 30, 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

Suburban Propane Partners  vs.  Northwest Natural Gas

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.

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.

Pair Trading with Suburban Propane and Northwest Natural

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

The idea behind Suburban Propane Partners and Northwest Natural Gas 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.