Correlation Between Teekay Tankers and DT Midstream

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

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

Diversification Opportunities for Teekay Tankers and DT Midstream

-0.9

Correlation Coefficient

Teekay Tankers  DT Midstream

Pay attention - limited upside

The 3 months correlation between Teekay and DTM is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Teekay Tankers and DT Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DT Midstream 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 DT Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DT Midstream has no effect on the direction of Teekay Tankers i.e., Teekay Tankers and DT Midstream go up and down completely randomly.

Pair Corralation between Teekay Tankers and DT Midstream

Considering the 90-day investment horizon Teekay Tankers is expected to under-perform the DT Midstream. But the stock apears to be less risky and, when comparing its historical volatility, Teekay Tankers is 1.39 times less risky than DT Midstream. The stock trades about -0.45 of its potential returns per unit of risk. The DT Midstream is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  10,197  in DT Midstream on September 17, 2024 and sell it today you would lose (233.00) from holding DT Midstream or give up 2.28% of portfolio value over 90 days.

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

Teekay Tankers  vs.  DT Midstream

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 unfluctuating 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.

DT Midstream

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DT Midstream are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, DT Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teekay Tankers and DT Midstream

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

The idea behind Teekay Tankers and DT Midstream 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.