Correlation Between Teekay and Frontline
Can any of the company-specific risk be diversified away by investing in both Teekay and Frontline 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 and Frontline into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teekay and Frontline, you can compare the effects of market volatilities on Teekay and Frontline 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 with a short position of Frontline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teekay and Frontline.
Diversification Opportunities for Teekay and Frontline
Poor diversification
The 3 months correlation between Teekay and Frontline is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Teekay and Frontline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontline and Teekay 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 are associated (or correlated) with Frontline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontline has no effect on the direction of Teekay i.e., Teekay and Frontline go up and down completely randomly.
Pair Corralation between Teekay and Frontline
Allowing for the 90-day total investment horizon Teekay is expected to generate 1.64 times less return on investment than Frontline. But when comparing it to its historical volatility, Teekay is 1.73 times less risky than Frontline. It trades about 0.36 of its potential returns per unit of risk. Frontline is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 1,334 in Frontline on October 20, 2024 and sell it today you would earn a total of 402.00 from holding Frontline or generate 30.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teekay vs. Frontline
Performance |
| Timeline |
| Teekay |
| Frontline |
Teekay and Frontline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teekay and Frontline
The main advantage of trading using opposite Teekay and Frontline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teekay position performs unexpectedly, Frontline 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 Frontline will offset losses from the drop in Frontline's long position.| Teekay vs. Teekay Tankers | Teekay vs. DHT Holdings | Teekay vs. Frontline | Teekay vs. International Seaways |
| Frontline vs. Teekay Tankers | Frontline vs. DHT Holdings | Frontline vs. International Seaways | Frontline vs. Scorpio Tankers |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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