Correlation Between Plains All and Scorpio Tankers

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

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

Diversification Opportunities for Plains All and Scorpio Tankers

-0.42

Correlation Coefficient

Plains All  Scorpio Tankers

Very good diversification

The 3 months correlation between Plains and Scorpio is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Plains All American and Scorpio Tankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scorpio Tankers and Plains All 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 Plains All American are associated (or correlated) with Scorpio Tankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scorpio Tankers has no effect on the direction of Plains All i.e., Plains All and Scorpio Tankers go up and down completely randomly.

Pair Corralation between Plains All and Scorpio Tankers

Considering the 90-day investment horizon Plains All American is expected to generate 0.79 times more return on investment than Scorpio Tankers. However, Plains All American is 1.27 times less risky than Scorpio Tankers. It trades about 0.03 of its potential returns per unit of risk. Scorpio Tankers is currently generating about -0.29 per unit of risk. If you would invest  1,745  in Plains All American on September 16, 2024 and sell it today you would earn a total of  41.00  from holding Plains All American or generate 2.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Plains All American  vs.  Scorpio Tankers

Plains All American

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Plains All American are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Plains All is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Scorpio Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scorpio Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Plains All and Scorpio Tankers

The main advantage of trading using opposite Plains All and Scorpio Tankers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plains All position performs unexpectedly, Scorpio 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 Scorpio Tankers will offset losses from the drop in Scorpio Tankers' long position.

The idea behind Plains All American and Scorpio Tankers 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.