Correlation Between Teekay and ONEOK

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

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

Diversification Opportunities for Teekay and ONEOK

0.56

Correlation Coefficient

Teekay  ONEOK

Very weak diversification

The 3 months correlation between Teekay and ONEOK is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Teekay and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc 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 ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of Teekay i.e., Teekay and ONEOK go up and down completely randomly.

Pair Corralation between Teekay and ONEOK

Allowing for the 90-day total investment horizon Teekay is expected to generate 1.27 times less return on investment than ONEOK. In addition to that, Teekay is 1.32 times more volatile than ONEOK Inc. It trades about 0.0 of its total potential returns per unit of risk. ONEOK Inc is currently generating about 0.01 per unit of volatility. If you would invest  9,976  in ONEOK Inc on December 27, 2024 and sell it today you would lose (27.00) from holding ONEOK Inc or give up 0.27% of portfolio value over 90 days.

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

Teekay  vs.  ONEOK Inc

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.

ONEOK Inc

Risk-Adjusted Performance

Weak

Over the last 90 days ONEOK Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, ONEOK is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Teekay and ONEOK

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

The idea behind Teekay and ONEOK Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.