Correlation Between Teekay Tankers and Cool

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

By analyzing existing cross correlation between Teekay Tankers and Cool Company, you can compare the effects of market volatilities on Teekay Tankers and Cool 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 Tankers with a short position of Cool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teekay Tankers and Cool.

Diversification Opportunities for Teekay Tankers and Cool

0.84

Correlation Coefficient

Teekay Tankers  Cool

Very poor diversification

The 3 months correlation between Teekay and Cool is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Teekay Tankers and Cool Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company and Teekay Tankers 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 Tankers are associated (or correlated) with Cool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company has no effect on the direction of Teekay Tankers i.e., Teekay Tankers and Cool go up and down completely randomly.

Pair Corralation between Teekay Tankers and Cool

Considering the 90-day investment horizon Teekay Tankers is expected to generate 0.75 times more return on investment than Cool. However, Teekay Tankers is 1.33 times less risky than Cool. It trades about -0.25 of its potential returns per unit of risk. Cool Company is currently generating about -0.21 per unit of risk. If you would invest  5,476  in Teekay Tankers on September 12, 2024 and sell it today you would lose (1,551) from holding Teekay Tankers or give up 28.32% of portfolio value over 90 days.

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

Teekay Tankers  vs.  Cool Company

Teekay Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teekay Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators 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.

Cool Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cool Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Teekay Tankers and Cool

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

The idea behind Teekay Tankers and Cool Company 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.