Correlation Between Dynagas LNG and Teekay Tankers

Can any of the company-specific risk be diversified away by investing in both Dynagas LNG 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 Dynagas LNG and Teekay Tankers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dynagas LNG Partners and Teekay Tankers, you can compare the effects of market volatilities on Dynagas LNG 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 Dynagas LNG with a short position of Teekay Tankers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynagas LNG and Teekay Tankers.

Diversification Opportunities for Dynagas LNG and Teekay Tankers

-0.08

Correlation Coefficient

Dynagas LNG  Teekay Tankers

Good diversification

The 3 months correlation between Dynagas and Teekay is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Dynagas LNG Partners and Teekay Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay Tankers and Dynagas LNG 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 Dynagas LNG Partners 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 Dynagas LNG i.e., Dynagas LNG and Teekay Tankers go up and down completely randomly.

Pair Corralation between Dynagas LNG and Teekay Tankers

Assuming the 90 days trading horizon Dynagas LNG is expected to generate 1.23 times less return on investment than Teekay Tankers. But when comparing it to its historical volatility, Dynagas LNG Partners is 6.78 times less risky than Teekay Tankers. It trades about 0.08 of its potential returns per unit of risk. Teekay Tankers is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,860  in Teekay Tankers on December 29, 2024 and sell it today you would earn a total of  8.00  from holding Teekay Tankers or generate 0.21% return on investment over 90 days.

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

Dynagas LNG Partners  vs.  Teekay Tankers

Dynagas LNG Partners

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dynagas LNG Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dynagas LNG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Teekay Tankers

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Teekay Tankers are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Teekay Tankers is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Dynagas LNG and Teekay Tankers

The main advantage of trading using opposite Dynagas LNG and Teekay Tankers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynagas LNG 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 Dynagas LNG Partners 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.