Correlation Between Teekay and Tsakos Energy

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

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

Diversification Opportunities for Teekay and Tsakos Energy

0.96

Correlation Coefficient

Teekay  Tsakos Energy

Almost no diversification

The 3 months correlation between Teekay and Tsakos is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Teekay and Tsakos Energy Navigation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsakos Energy Navigation 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 Tsakos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsakos Energy Navigation has no effect on the direction of Teekay i.e., Teekay and Tsakos Energy go up and down completely randomly.

Pair Corralation between Teekay and Tsakos Energy

Allowing for the 90-day total investment horizon Teekay is expected to under-perform the Tsakos Energy. But the stock apears to be less risky and, when comparing its historical volatility, Teekay is 1.26 times less risky than Tsakos Energy. The stock trades about -0.01 of its potential returns per unit of risk. The Tsakos Energy Navigation is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,671  in Tsakos Energy Navigation on December 28, 2024 and sell it today you would earn a total of  19.00  from holding Tsakos Energy Navigation or generate 1.14% return on investment over 90 days.

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

Teekay  vs.  Tsakos Energy Navigation

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.

Tsakos Energy Navigation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tsakos Energy Navigation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Tsakos Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Teekay and Tsakos Energy

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

The idea behind Teekay and Tsakos Energy Navigation 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.