Correlation Between United Maritime and Teekay Tankers

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

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

Diversification Opportunities for United Maritime and Teekay Tankers

0.95

Correlation Coefficient

United Maritime  Teekay Tankers

Almost no diversification

The 3 months correlation between United and Teekay is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding United Maritime and Teekay Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay Tankers and United Maritime 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 United Maritime are associated (or correlated) with Teekay Tankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teekay Tankers has no effect on the direction of United Maritime i.e., United Maritime and Teekay Tankers go up and down completely randomly.

Pair Corralation between United Maritime and Teekay Tankers

Given the investment horizon of 90 days United Maritime is expected to under-perform the Teekay Tankers. But the stock apears to be less risky and, when comparing its historical volatility, United Maritime is 1.03 times less risky than Teekay Tankers. The stock trades about -0.32 of its potential returns per unit of risk. The Teekay Tankers is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  4,152  in Teekay Tankers on September 24, 2024 and sell it today you would lose (243.00) from holding Teekay Tankers or give up 5.85% of portfolio value over 90 days.

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

United Maritime  vs.  Teekay Tankers

United Maritime

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Maritime has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 weak 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.

Pair Trading with United Maritime and Teekay Tankers

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

The idea behind United Maritime and Teekay 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.