Correlation Between Navigator Holdings and Teekay Tankers

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

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

Diversification Opportunities for Navigator Holdings and Teekay Tankers

0.72

Correlation Coefficient

Navigator Holdings  Teekay Tankers

Poor diversification

The 3 months correlation between Navigator and Teekay is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Navigator Holdings and Teekay Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay Tankers and Navigator Holdings 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 Navigator Holdings 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 Navigator Holdings i.e., Navigator Holdings and Teekay Tankers go up and down completely randomly.

Pair Corralation between Navigator Holdings and Teekay Tankers

Given the investment horizon of 90 days Navigator Holdings is expected to generate 1.46 times less return on investment than Teekay Tankers. But when comparing it to its historical volatility, Navigator Holdings is 1.49 times less risky than Teekay Tankers. It trades about 0.04 of its potential returns per unit of risk. Teekay Tankers is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,848  in Teekay Tankers on September 20, 2024 and sell it today you would earn a total of  967.00  from holding Teekay Tankers or generate 33.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Navigator Holdings  vs.  Teekay Tankers

Navigator Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Teekay Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teekay Tankers 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 basic indicators 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 Navigator Holdings and Teekay Tankers

The main advantage of trading using opposite Navigator Holdings and Teekay Tankers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Navigator Holdings 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 Navigator Holdings 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.