Correlation Between Teekay and Targa Resources

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

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

Diversification Opportunities for Teekay and Targa Resources

-0.59

Correlation Coefficient

Teekay  Targa Resources

Excellent diversification

The 3 months correlation between Teekay and Targa is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Teekay and Targa Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Targa Resources 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 Targa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Targa Resources has no effect on the direction of Teekay i.e., Teekay and Targa Resources go up and down completely randomly.

Pair Corralation between Teekay and Targa Resources

Allowing for the 90-day total investment horizon Teekay is expected to under-perform the Targa Resources. In addition to that, Teekay is 1.35 times more volatile than Targa Resources. It trades about -0.04 of its total potential returns per unit of risk. Targa Resources is currently generating about 0.25 per unit of volatility. If you would invest  14,649  in Targa Resources on September 4, 2024 and sell it today you would earn a total of  4,805  from holding Targa Resources or generate 32.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Teekay  vs.  Targa Resources

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 latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Targa Resources

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Targa Resources are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Targa Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teekay and Targa Resources

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

The idea behind Teekay and Targa Resources 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.