Correlation Between Tsakos Energy and Teekay

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

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

Diversification Opportunities for Tsakos Energy and Teekay

0.96

Correlation Coefficient

Tsakos Energy  Teekay

Almost no diversification

The 3 months correlation between Tsakos and Teekay is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Tsakos Energy Navigation and Teekay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay and Tsakos Energy 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 Tsakos Energy Navigation 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 Tsakos Energy i.e., Tsakos Energy and Teekay go up and down completely randomly.

Pair Corralation between Tsakos Energy and Teekay

Considering the 90-day investment horizon Tsakos Energy Navigation is expected to generate 1.26 times more return on investment than Teekay. However, Tsakos Energy is 1.26 times more volatile than Teekay. It trades about 0.02 of its potential returns per unit of risk. Teekay is currently generating about -0.01 per unit of risk. If you would invest  1,671  in Tsakos Energy Navigation on December 28, 2024 and sell it today you would earn a total of  19.00  from holding Tsakos Energy Navigation or generate 1.14% return on investment over 90 days.

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

Tsakos Energy Navigation  vs.  Teekay

Tsakos Energy Navigation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tsakos Energy Navigation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Tsakos Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Teekay

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teekay has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Teekay is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Tsakos Energy and Teekay

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

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.