Correlation Between Martin Midstream and Teekay Tankers

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

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

Diversification Opportunities for Martin Midstream and Teekay Tankers

-0.5

Correlation Coefficient

Martin Midstream  Teekay Tankers

Very good diversification

The 3 months correlation between Martin and Teekay is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Martin Midstream Partners and Teekay Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay Tankers and Martin 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 Martin Midstream 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 Martin Midstream i.e., Martin Midstream and Teekay Tankers go up and down completely randomly.

Pair Corralation between Martin Midstream and Teekay Tankers

Given the investment horizon of 90 days Martin Midstream Partners is expected to generate 0.95 times more return on investment than Teekay Tankers. However, Martin Midstream Partners is 1.05 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 -0.04 per unit of risk. If you would invest  243.00  in Martin Midstream Partners on December 28, 2024 and sell it today you would earn a total of  116.00  from holding Martin Midstream Partners or generate 47.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.63%
Values	Daily Returns

Martin Midstream Partners  vs.  Teekay Tankers

Martin Midstream Partners

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Midstream Partners are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, Martin Midstream is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Teekay Tankers

Risk-Adjusted Performance

Very Weak

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.

Pair Trading with Martin Midstream and Teekay Tankers

The main advantage of trading using opposite Martin Midstream and Teekay Tankers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martin Midstream 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 Martin Midstream 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.