Correlation Between Teekay and Brooge Energy

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

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

Diversification Opportunities for Teekay and Brooge Energy

0.48

Correlation Coefficient

Teekay  Brooge Energy

Very weak diversification

The 3 months correlation between Teekay and Brooge is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Teekay and Brooge Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brooge Energy Limited 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 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brooge Energy Limited has no effect on the direction of Teekay i.e., Teekay and Brooge Energy go up and down completely randomly.

Pair Corralation between Teekay and Brooge Energy

Allowing for the 90-day total investment horizon Teekay is expected to generate 63.58 times less return on investment than Brooge Energy. But when comparing it to its historical volatility, Teekay is 14.37 times less risky than Brooge Energy. It trades about 0.03 of its potential returns per unit of risk. Brooge Energy Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.11  in Brooge Energy Limited on September 27, 2024 and sell it today you would lose (0.04) from holding Brooge Energy Limited or give up 36.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	69.77%
Values	Daily Returns

Teekay  vs.  Brooge Energy Limited

Teekay

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teekay 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 forward-looking signals 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.

Brooge Energy Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brooge Energy Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Brooge Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teekay and Brooge Energy

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

The idea behind Teekay and Brooge Energy Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.