Correlation Between DHT Holdings and Teekay Tankers

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Can any of the company-specific risk be diversified away by investing in both DHT Holdings and Teekay Tankers 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 DHT Holdings and Teekay Tankers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DHT Holdings and Teekay Tankers, you can compare the effects of market volatilities on DHT Holdings and Teekay Tankers 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 DHT Holdings with a short position of Teekay Tankers. Check out your portfolio center. Please also check ongoing floating volatility patterns of DHT Holdings and Teekay Tankers.

Diversification Opportunities for DHT Holdings and Teekay Tankers

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between DHT and Teekay is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding DHT Holdings and Teekay Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay Tankers and DHT Holdings 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 DHT Holdings are associated (or correlated) with Teekay Tankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teekay Tankers has no effect on the direction of DHT Holdings i.e., DHT Holdings and Teekay Tankers go up and down completely randomly.

Pair Corralation between DHT Holdings and Teekay Tankers

Considering the 90-day investment horizon DHT Holdings is expected to generate 0.94 times more return on investment than Teekay Tankers. However, DHT Holdings is 1.06 times less risky than Teekay Tankers. It trades about 0.06 of its potential returns per unit of risk. Teekay Tankers is currently generating about -0.03 per unit of risk. If you would invest  1,040  in DHT Holdings on November 19, 2024 and sell it today you would earn a total of  79.00  from holding DHT Holdings or generate 7.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

DHT Holdings  vs.  Teekay Tankers

 Performance 
       Timeline  
DHT Holdings 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in DHT Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical indicators, DHT Holdings may actually be approaching a critical reversion point that can send shares even higher in March 2025.
Teekay Tankers 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Teekay Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Teekay Tankers is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

DHT Holdings and Teekay Tankers Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DHT Holdings and Teekay Tankers

The main advantage of trading using opposite DHT Holdings and Teekay Tankers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DHT Holdings position performs unexpectedly, Teekay Tankers 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 Teekay Tankers will offset losses from the drop in Teekay Tankers' long position.
The idea behind DHT Holdings and Teekay Tankers 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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