Correlation Between MPLX LP and Teekay

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

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

Diversification Opportunities for MPLX LP and Teekay

-0.7

Correlation Coefficient

MPLX LP  Teekay

Excellent diversification

The 3 months correlation between MPLX and Teekay is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding MPLX LP and Teekay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay and MPLX LP 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 MPLX 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 MPLX LP i.e., MPLX LP and Teekay go up and down completely randomly.

Pair Corralation between MPLX LP and Teekay

Given the investment horizon of 90 days MPLX LP is expected to generate 1.05 times less return on investment than Teekay. But when comparing it to its historical volatility, MPLX LP is 3.67 times less risky than Teekay. It trades about 0.17 of its potential returns per unit of risk. Teekay is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  496.00  in Teekay on September 19, 2024 and sell it today you would earn a total of  147.50  from holding Teekay or generate 29.74% return on investment over 90 days.

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

MPLX LP  vs.  Teekay

MPLX LP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MPLX LP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, MPLX LP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Teekay

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teekay has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with MPLX LP and Teekay

The main advantage of trading using opposite MPLX LP and Teekay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MPLX LP 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 MPLX 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 Anywhere module to track or share privately all of your investments from the convenience of any device.