Correlation Between Scorpio Tankers and Teekay Tankers
Can any of the company-specific risk be diversified away by investing in both Scorpio Tankers 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 Scorpio Tankers and Teekay Tankers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scorpio Tankers and Teekay Tankers, you can compare the effects of market volatilities on Scorpio Tankers 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 Scorpio Tankers with a short position of Teekay Tankers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scorpio Tankers and Teekay Tankers.
Diversification Opportunities for Scorpio Tankers and Teekay Tankers
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Scorpio and Teekay is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Scorpio Tankers and Teekay Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay Tankers and Scorpio 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 Scorpio Tankers 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 Scorpio Tankers i.e., Scorpio Tankers and Teekay Tankers go up and down completely randomly.
Pair Corralation between Scorpio Tankers and Teekay Tankers
Given the investment horizon of 90 days Scorpio Tankers is expected to under-perform the Teekay Tankers. But the stock apears to be less risky and, when comparing its historical volatility, Scorpio Tankers is 1.03 times less risky than Teekay Tankers. The stock trades about -0.14 of its potential returns per unit of risk. The Teekay Tankers is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 4,386 in Teekay Tankers on December 12, 2024 and sell it today you would lose (753.00) from holding Teekay Tankers or give up 17.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scorpio Tankers vs. Teekay Tankers
Performance |
| Timeline |
| Scorpio Tankers |
| Teekay Tankers |
Scorpio Tankers and Teekay Tankers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scorpio Tankers and Teekay Tankers
The main advantage of trading using opposite Scorpio Tankers and Teekay Tankers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scorpio Tankers 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.| Scorpio Tankers vs. Teekay Tankers | ||
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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