Correlation Between Teekay Tankers and Torm PLC

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

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

Diversification Opportunities for Teekay Tankers and Torm PLC

0.91

Correlation Coefficient

Teekay Tankers  Torm PLC

Almost no diversification

The 3 months correlation between Teekay and Torm is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Teekay Tankers and Torm PLC Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torm PLC Class 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 Torm PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torm PLC Class has no effect on the direction of Teekay Tankers i.e., Teekay Tankers and Torm PLC go up and down completely randomly.

Pair Corralation between Teekay Tankers and Torm PLC

Considering the 90-day investment horizon Teekay Tankers is expected to generate 0.86 times more return on investment than Torm PLC. However, Teekay Tankers is 1.17 times less risky than Torm PLC. It trades about 0.01 of its potential returns per unit of risk. Torm PLC Class is currently generating about -0.01 per unit of risk. If you would invest  3,860  in Teekay Tankers on December 28, 2024 and sell it today you would lose (43.00) from holding Teekay Tankers or give up 1.11% of portfolio value over 90 days.

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

Teekay Tankers  vs.  Torm PLC Class

Teekay Tankers

Risk-Adjusted Performance

Weak

Over the last 90 days Teekay Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Torm PLC Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Torm PLC Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Torm PLC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Teekay Tankers and Torm PLC

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

The idea behind Teekay Tankers and Torm PLC Class 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.