Correlation Between Permian Basin and Tsakos Energy

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

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

Diversification Opportunities for Permian Basin and Tsakos Energy

-0.42

Correlation Coefficient

Permian Basin  Tsakos Energy

Very good diversification

The 3 months correlation between Permian and Tsakos is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Permian Basin Royalty and Tsakos Energy Navigation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsakos Energy Navigation and Permian Basin 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 Permian Basin Royalty are associated (or correlated) with Tsakos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsakos Energy Navigation has no effect on the direction of Permian Basin i.e., Permian Basin and Tsakos Energy go up and down completely randomly.

Pair Corralation between Permian Basin and Tsakos Energy

Considering the 90-day investment horizon Permian Basin Royalty is expected to generate 1.16 times more return on investment than Tsakos Energy. However, Permian Basin is 1.16 times more volatile than Tsakos Energy Navigation. It trades about 0.12 of its potential returns per unit of risk. Tsakos Energy Navigation is currently generating about -0.2 per unit of risk. If you would invest  1,107  in Permian Basin Royalty on August 30, 2024 and sell it today you would earn a total of  206.00  from holding Permian Basin Royalty or generate 18.61% return on investment over 90 days.

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

Permian Basin Royalty  vs.  Tsakos Energy Navigation

Permian Basin Royalty

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Basin Royalty are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Permian Basin unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tsakos Energy Navigation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tsakos Energy Navigation 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Permian Basin and Tsakos Energy

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

The idea behind Permian Basin Royalty and Tsakos Energy Navigation 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.