Correlation Between Nordic American and Targa Resources

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

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

Diversification Opportunities for Nordic American and Targa Resources

-0.85

Correlation Coefficient

Nordic American  Targa Resources

Pay attention - limited upside

The 3 months correlation between Nordic and Targa is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nordic American Tankers and Targa Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Targa Resources and Nordic American 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 Nordic American Tankers are associated (or correlated) with Targa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Targa Resources has no effect on the direction of Nordic American i.e., Nordic American and Targa Resources go up and down completely randomly.

Pair Corralation between Nordic American and Targa Resources

Considering the 90-day investment horizon Nordic American Tankers is expected to under-perform the Targa Resources. But the stock apears to be less risky and, when comparing its historical volatility, Nordic American Tankers is 1.01 times less risky than Targa Resources. The stock trades about -0.18 of its potential returns per unit of risk. The Targa Resources is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  14,921  in Targa Resources on August 31, 2024 and sell it today you would earn a total of  5,509  from holding Targa Resources or generate 36.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Nordic American Tankers  vs.  Targa Resources

Nordic American Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordic American Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Targa Resources

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Targa Resources are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Targa Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordic American and Targa Resources

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

The idea behind Nordic American Tankers and Targa Resources 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.