Correlation Between Teekay Tankers and Nordic American

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

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

Diversification Opportunities for Teekay Tankers and Nordic American

0.9

Correlation Coefficient

Teekay Tankers  Nordic American

Almost no diversification

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

Pair Corralation between Teekay Tankers and Nordic American

Considering the 90-day investment horizon Teekay Tankers is expected to generate 2.79 times less return on investment than Nordic American. In addition to that, Teekay Tankers is 1.25 times more volatile than Nordic American Tankers. It trades about 0.01 of its total potential returns per unit of risk. Nordic American Tankers is currently generating about 0.05 per unit of volatility. If you would invest  241.00  in Nordic American Tankers on December 27, 2024 and sell it today you would earn a total of  12.00  from holding Nordic American Tankers or generate 4.98% return on investment over 90 days.

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

Teekay Tankers  vs.  Nordic American Tankers

Teekay Tankers

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Teekay Tankers are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Teekay Tankers is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Nordic American Tankers

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic American Tankers are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Nordic American may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Teekay Tankers and Nordic American

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

The idea behind Teekay Tankers and Nordic American Tankers 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.