Correlation Between Tsakos Energy and Targa Resources

Can any of the company-specific risk be diversified away by investing in both Tsakos Energy 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 Tsakos Energy and Targa Resources 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 Targa Resources, you can compare the effects of market volatilities on Tsakos Energy 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 Tsakos Energy with a short position of Targa Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tsakos Energy and Targa Resources.

Diversification Opportunities for Tsakos Energy and Targa Resources

0.43

Correlation Coefficient

Tsakos Energy  Targa Resources

Very weak diversification

The 3 months correlation between Tsakos and Targa is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Tsakos Energy Navigation and Targa Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Targa Resources 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 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 Tsakos Energy i.e., Tsakos Energy and Targa Resources go up and down completely randomly.

Pair Corralation between Tsakos Energy and Targa Resources

Considering the 90-day investment horizon Tsakos Energy is expected to generate 3.53 times less return on investment than Targa Resources. In addition to that, Tsakos Energy is 1.35 times more volatile than Targa Resources. It trades about 0.02 of its total potential returns per unit of risk. Targa Resources is currently generating about 0.1 per unit of volatility. If you would invest  17,711  in Targa Resources on December 28, 2024 and sell it today you would earn a total of  2,100  from holding Targa Resources or generate 11.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Tsakos Energy Navigation  vs.  Targa Resources

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.

Targa Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Targa Resources are ranked lower than 7 (%) 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 Tsakos Energy and Targa Resources

The main advantage of trading using opposite Tsakos Energy and Targa Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tsakos Energy 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 Tsakos Energy Navigation 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.