Correlation Between Teekay and Plains GP

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

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

Diversification Opportunities for Teekay and Plains GP

-0.37

Correlation Coefficient

Teekay  Plains GP

Very good diversification

The 3 months correlation between Teekay and Plains is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Teekay and Plains GP Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plains GP 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 Plains GP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plains GP Holdings has no effect on the direction of Teekay i.e., Teekay and Plains GP go up and down completely randomly.

Pair Corralation between Teekay and Plains GP

Allowing for the 90-day total investment horizon Teekay is expected to generate 1.65 times more return on investment than Plains GP. However, Teekay is 1.65 times more volatile than Plains GP Holdings. It trades about 0.2 of its potential returns per unit of risk. Plains GP Holdings is currently generating about -0.28 per unit of risk. If you would invest  640.00  in Teekay on October 6, 2024 and sell it today you would earn a total of  54.00  from holding Teekay or generate 8.44% return on investment over 90 days.

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

Teekay  vs.  Plains GP Holdings

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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Plains GP Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Plains GP Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Plains GP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Teekay and Plains GP

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

The idea behind Teekay and Plains GP 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..