Correlation Between Teekay and Brooge Holdings

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

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

Diversification Opportunities for Teekay and Brooge Holdings

-0.12

Correlation Coefficient

Teekay  Brooge Holdings

Good diversification

The 3 months correlation between Teekay and Brooge is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Teekay and Brooge Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brooge Holdings and Teekay 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 Teekay are associated (or correlated) with Brooge Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brooge Holdings has no effect on the direction of Teekay i.e., Teekay and Brooge Holdings go up and down completely randomly.

Pair Corralation between Teekay and Brooge Holdings

Allowing for the 90-day total investment horizon Teekay is expected to under-perform the Brooge Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Teekay is 2.95 times less risky than Brooge Holdings. The stock trades about -0.01 of its potential returns per unit of risk. The Brooge Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  146.00  in Brooge Holdings on December 28, 2024 and sell it today you would lose (14.00) from holding Brooge Holdings or give up 9.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Teekay  vs.  Brooge Holdings

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.

Brooge Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brooge Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Brooge Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Teekay and Brooge Holdings

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

The idea behind Teekay and Brooge Holdings 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.