Correlation Between EnLink Midstream and Teekay

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

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

Diversification Opportunities for EnLink Midstream and Teekay

0.43

Correlation Coefficient

EnLink Midstream  Teekay

Very weak diversification

The 3 months correlation between EnLink and Teekay is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding EnLink Midstream LLC and Teekay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay and EnLink Midstream 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 EnLink Midstream LLC 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 EnLink Midstream i.e., EnLink Midstream and Teekay go up and down completely randomly.

Pair Corralation between EnLink Midstream and Teekay

Given the investment horizon of 90 days EnLink Midstream LLC is expected to generate 0.67 times more return on investment than Teekay. However, EnLink Midstream LLC is 1.5 times less risky than Teekay. It trades about -0.01 of its potential returns per unit of risk. Teekay is currently generating about -0.01 per unit of risk. If you would invest  1,420  in EnLink Midstream LLC on December 28, 2024 and sell it today you would lose (8.00) from holding EnLink Midstream LLC or give up 0.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	36.67%
Values	Daily Returns

EnLink Midstream LLC  vs.  Teekay

EnLink Midstream LLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days EnLink Midstream LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, EnLink Midstream is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Teekay

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teekay has generated negative risk-adjusted returns adding no value to investors with long positions. 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 EnLink Midstream and Teekay

The main advantage of trading using opposite EnLink Midstream and Teekay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EnLink Midstream 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 EnLink Midstream LLC 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.