Correlation Between Teekay and Sabine Royalty

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

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

Diversification Opportunities for Teekay and Sabine Royalty

-0.62

Correlation Coefficient

Teekay  Sabine Royalty

Excellent diversification

The 3 months correlation between Teekay and Sabine is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Teekay and Sabine Royalty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabine Royalty Trust 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 Sabine Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabine Royalty Trust has no effect on the direction of Teekay i.e., Teekay and Sabine Royalty go up and down completely randomly.

Pair Corralation between Teekay and Sabine Royalty

Allowing for the 90-day total investment horizon Teekay is expected to under-perform the Sabine Royalty. In addition to that, Teekay is 1.34 times more volatile than Sabine Royalty Trust. It trades about -0.22 of its total potential returns per unit of risk. Sabine Royalty Trust is currently generating about 0.03 per unit of volatility. If you would invest  6,153  in Sabine Royalty Trust on September 21, 2024 and sell it today you would earn a total of  47.00  from holding Sabine Royalty Trust or generate 0.76% return on investment over 90 days.

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

Teekay  vs.  Sabine Royalty Trust

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.

Sabine Royalty Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sabine Royalty Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Sabine Royalty is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Teekay and Sabine Royalty

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

The idea behind Teekay and Sabine Royalty Trust 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.

Check out your portfolio center.

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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.