Correlation Between Williams Companies and Teekay

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

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

Diversification Opportunities for Williams Companies and Teekay

0.41

Correlation Coefficient

Williams Companies  Teekay

Very weak diversification

The 3 months correlation between Williams and Teekay is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Williams Companies and Teekay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay and Williams Companies 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 Williams Companies are associated (or correlated) with Teekay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teekay has no effect on the direction of Williams Companies i.e., Williams Companies and Teekay go up and down completely randomly.

Pair Corralation between Williams Companies and Teekay

Considering the 90-day investment horizon Williams Companies is expected to under-perform the Teekay. But the stock apears to be less risky and, when comparing its historical volatility, Williams Companies is 1.11 times less risky than Teekay. The stock trades about -0.02 of its potential returns per unit of risk. The Teekay is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  642.00  in Teekay on November 28, 2024 and sell it today you would earn a total of  41.00  from holding Teekay or generate 6.39% return on investment over 90 days.

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

Williams Companies  vs.  Teekay

Williams Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Williams Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Williams Companies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Teekay

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Teekay are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Teekay may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Williams Companies and Teekay

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

The idea behind Williams Companies and Teekay 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .