Correlation Between Energy Transfer and Teekay

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

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

Diversification Opportunities for Energy Transfer and Teekay

0.65

Correlation Coefficient

Energy Transfer  Teekay

Poor diversification

The 3 months correlation between Energy and Teekay is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Teekay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay and Energy Transfer 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 Energy Transfer LP 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 Energy Transfer i.e., Energy Transfer and Teekay go up and down completely randomly.

Pair Corralation between Energy Transfer and Teekay

Allowing for the 90-day total investment horizon Energy Transfer is expected to generate 3.51 times less return on investment than Teekay. But when comparing it to its historical volatility, Energy Transfer LP is 1.3 times less risky than Teekay. It trades about 0.0 of its potential returns per unit of risk. Teekay is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  671.00  in Teekay on December 27, 2024 and sell it today you would earn a total of  0.00  from holding Teekay or generate 0.0% return on investment over 90 days.

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

Energy Transfer LP  vs.  Teekay

Energy Transfer LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Transfer LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Energy Transfer is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Energy Transfer and Teekay

The main advantage of trading using opposite Energy Transfer and Teekay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Transfer 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 Energy Transfer LP 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.