Correlation Between International Seaways and Teekay

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

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

Diversification Opportunities for International Seaways and Teekay

0.87

Correlation Coefficient

International Seaways  Teekay

Very poor diversification

The 3 months correlation between International and Teekay is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding International Seaways and Teekay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay and International Seaways 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 International Seaways 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 International Seaways i.e., International Seaways and Teekay go up and down completely randomly.

Pair Corralation between International Seaways and Teekay

Given the investment horizon of 90 days International Seaways is expected to under-perform the Teekay. But the stock apears to be less risky and, when comparing its historical volatility, International Seaways is 1.31 times less risky than Teekay. The stock trades about -0.18 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  831.00  in Teekay on August 30, 2024 and sell it today you would lose (86.00) from holding Teekay or give up 10.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

International Seaways  vs.  Teekay

International Seaways

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Seaways has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Teekay

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teekay has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with International Seaways and Teekay

The main advantage of trading using opposite International Seaways and Teekay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Seaways 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 International Seaways 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.