Correlation Between Teekay and DHT Holdings

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

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

Diversification Opportunities for Teekay and DHT Holdings

0.4

Correlation Coefficient

Teekay  DHT Holdings

Very weak diversification

The 3 months correlation between Teekay and DHT is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Teekay and DHT Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHT 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 DHT Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHT Holdings has no effect on the direction of Teekay i.e., Teekay and DHT Holdings go up and down completely randomly.

Pair Corralation between Teekay and DHT Holdings

Allowing for the 90-day total investment horizon Teekay is expected to generate 56.93 times less return on investment than DHT Holdings. But when comparing it to its historical volatility, Teekay is 1.07 times less risky than DHT Holdings. It trades about 0.0 of its potential returns per unit of risk. DHT Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  918.00  in DHT Holdings on December 26, 2024 and sell it today you would earn a total of  170.00  from holding DHT Holdings or generate 18.52% return on investment over 90 days.

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

Teekay  vs.  DHT 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.

DHT Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DHT Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical indicators, DHT Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teekay and DHT Holdings

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

The idea behind Teekay and DHT 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.