Correlation Between Dynagas LNG and Teekay

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

Diversification Opportunities for Dynagas LNG and Teekay

0.36

Correlation Coefficient

Dynagas LNG  Teekay

Weak diversification

The 3 months correlation between Dynagas and Teekay is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dynagas LNG Partners and Teekay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teekay has no effect on the direction of Dynagas LNG i.e., Dynagas LNG and Teekay go up and down completely randomly.

Pair Corralation between Dynagas LNG and Teekay

Given the investment horizon of 90 days Dynagas LNG Partners is expected to under-perform the Teekay. In addition to that, Dynagas LNG is 1.31 times more volatile than Teekay. It trades about 0.0 of its total potential returns per unit of risk. Teekay is currently generating about 0.02 per unit of volatility. If you would invest  689.00  in Teekay on November 19, 2024 and sell it today you would earn a total of  13.00  from holding Teekay or generate 1.89% return on investment over 90 days.

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

Dynagas LNG Partners  vs.  Teekay

Dynagas LNG Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dynagas LNG Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dynagas LNG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Teekay

Risk-Adjusted Performance

Weak

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

Pair Trading with Dynagas LNG and Teekay

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

The idea behind Dynagas LNG Partners and Teekay 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.