Correlation Between Teekay Tankers and DHT Holdings
Can any of the company-specific risk be diversified away by investing in both Teekay Tankers and DHT Holdings 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 DHT Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teekay Tankers and DHT Holdings, you can compare the effects of market volatilities on Teekay Tankers and DHT Holdings 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 DHT Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teekay Tankers and DHT Holdings.
Diversification Opportunities for Teekay Tankers and DHT Holdings
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Teekay and DHT is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Teekay Tankers and DHT Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHT Holdings 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 DHT Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHT Holdings has no effect on the direction of Teekay Tankers i.e., Teekay Tankers and DHT Holdings go up and down completely randomly.
Pair Corralation between Teekay Tankers and DHT Holdings
Considering the 90-day investment horizon Teekay Tankers is expected to generate 1.18 times less return on investment than DHT Holdings. In addition to that, Teekay Tankers is 1.13 times more volatile than DHT Holdings. It trades about 0.26 of its total potential returns per unit of risk. DHT Holdings is currently generating about 0.35 per unit of volatility. If you would invest 889.00 in DHT Holdings on October 20, 2024 and sell it today you would earn a total of 187.00 from holding DHT Holdings or generate 21.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teekay Tankers vs. DHT Holdings
Performance |
| Timeline |
| Teekay Tankers |
| DHT Holdings |
Teekay Tankers and DHT Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teekay Tankers and DHT Holdings
The main advantage of trading using opposite Teekay Tankers and DHT Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teekay Tankers position performs unexpectedly, DHT Holdings 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 DHT Holdings will offset losses from the drop in DHT Holdings' long position.The idea behind Teekay Tankers and DHT Holdings 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.| DHT Holdings vs. Teekay Tankers | DHT Holdings vs. Frontline | DHT Holdings vs. International Seaways | DHT Holdings 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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