Correlation Between Air Transport and Suburban Propane

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

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

Diversification Opportunities for Air Transport and Suburban Propane

-0.39

Correlation Coefficient

Air Transport  Suburban Propane

Very good diversification

The 3 months correlation between Air and Suburban is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services 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 Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and Suburban Propane go up and down completely randomly.

Pair Corralation between Air Transport and Suburban Propane

Given the investment horizon of 90 days Air Transport Services is expected to generate 1.28 times more return on investment than Suburban Propane. However, Air Transport is 1.28 times more volatile than Suburban Propane Partners. It trades about 0.07 of its potential returns per unit of risk. Suburban Propane Partners is currently generating about -0.04 per unit of risk. If you would invest  1,219  in Air Transport Services on January 29, 2024 and sell it today you would earn a total of  72.00  from holding Air Transport Services or generate 5.91% return on investment over 90 days.

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

Air Transport Services  vs.  Suburban Propane Partners

Air Transport Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Transport Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Suburban Propane Partners

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Suburban Propane Partners are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Air Transport and Suburban Propane

The main advantage of trading using opposite Air Transport and Suburban Propane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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 Air Transport Services 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.