Correlation Between Safe Bulkers and Teekay Tankers

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

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

Diversification Opportunities for Safe Bulkers and Teekay Tankers

0.92

Correlation Coefficient

Safe Bulkers  Teekay Tankers

Almost no diversification

The 3 months correlation between Safe and Teekay is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers and Teekay Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay Tankers and Safe Bulkers 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 Safe Bulkers 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 Safe Bulkers i.e., Safe Bulkers and Teekay Tankers go up and down completely randomly.

Pair Corralation between Safe Bulkers and Teekay Tankers

Allowing for the 90-day total investment horizon Safe Bulkers is expected to under-perform the Teekay Tankers. In addition to that, Safe Bulkers is 1.01 times more volatile than Teekay Tankers. It trades about -0.27 of its total potential returns per unit of risk. Teekay Tankers is currently generating about -0.13 per unit of volatility. If you would invest  4,152  in Teekay Tankers on September 24, 2024 and sell it today you would lose (243.00) from holding Teekay Tankers or give up 5.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Safe Bulkers  vs.  Teekay Tankers

Safe Bulkers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safe Bulkers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company 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 weak 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 Safe Bulkers and Teekay Tankers

The main advantage of trading using opposite Safe Bulkers and Teekay Tankers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safe Bulkers 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 Safe Bulkers 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.