Correlation Between Teekay and Energy Transfer

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

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

Diversification Opportunities for Teekay and Energy Transfer

-0.64

Correlation Coefficient

Teekay  Energy Transfer

Excellent diversification

The 3 months correlation between Teekay and Energy is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Teekay and Energy Transfer LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Transfer LP 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 Energy Transfer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Transfer LP has no effect on the direction of Teekay i.e., Teekay and Energy Transfer go up and down completely randomly.

Pair Corralation between Teekay and Energy Transfer

Allowing for the 90-day total investment horizon Teekay is expected to generate 2.77 times more return on investment than Energy Transfer. However, Teekay is 2.77 times more volatile than Energy Transfer LP. It trades about 0.06 of its potential returns per unit of risk. Energy Transfer LP is currently generating about 0.09 per unit of risk. If you would invest  394.00  in Teekay on September 12, 2024 and sell it today you would earn a total of  242.00  from holding Teekay or generate 61.42% return on investment over 90 days.

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

Teekay  vs.  Energy Transfer LP

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.

Energy Transfer LP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Energy Transfer is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Teekay and Energy Transfer

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

The idea behind Teekay and Energy Transfer LP 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.