Correlation Between Teekay Tankers and TOP Ships
Can any of the company-specific risk be diversified away by investing in both Teekay Tankers and TOP Ships 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 TOP Ships into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teekay Tankers and TOP Ships, you can compare the effects of market volatilities on Teekay Tankers and TOP Ships 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 TOP Ships. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teekay Tankers and TOP Ships.
Diversification Opportunities for Teekay Tankers and TOP Ships
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Teekay and TOP is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Teekay Tankers and TOP Ships in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOP Ships 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 TOP Ships. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOP Ships has no effect on the direction of Teekay Tankers i.e., Teekay Tankers and TOP Ships go up and down completely randomly.
Pair Corralation between Teekay Tankers and TOP Ships
Considering the 90-day investment horizon Teekay Tankers is expected to under-perform the TOP Ships. But the stock apears to be less risky and, when comparing its historical volatility, Teekay Tankers is 1.23 times less risky than TOP Ships. The stock trades about -0.21 of its potential returns per unit of risk. The TOP Ships is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 890.00 in TOP Ships on August 28, 2024 and sell it today you would lose (110.00) from holding TOP Ships or give up 12.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.44% |
| Values | Daily Returns |
Teekay Tankers vs. TOP Ships
Performance |
| Timeline |
| Teekay Tankers |
| TOP Ships |
Teekay Tankers and TOP Ships Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teekay Tankers and TOP Ships
The main advantage of trading using opposite Teekay Tankers and TOP Ships positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teekay Tankers position performs unexpectedly, TOP Ships 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 TOP Ships will offset losses from the drop in TOP Ships' long position.The idea behind Teekay Tankers and TOP Ships 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.| TOP Ships vs. United Maritime | TOP Ships vs. Globus Maritime | TOP Ships vs. Castor Maritime | TOP Ships vs. Safe Bulkers |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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