Correlation Between Teekay Tankers and SFL

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

By analyzing existing cross correlation between Teekay Tankers and SFL Corporation, you can compare the effects of market volatilities on Teekay Tankers and SFL 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 SFL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teekay Tankers and SFL.

Diversification Opportunities for Teekay Tankers and SFL

0.9

Correlation Coefficient

Teekay Tankers  SFL

Almost no diversification

The 3 months correlation between Teekay and SFL is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Teekay Tankers and SFL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFL Corporation 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 SFL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFL Corporation has no effect on the direction of Teekay Tankers i.e., Teekay Tankers and SFL go up and down completely randomly.

Pair Corralation between Teekay Tankers and SFL

Considering the 90-day investment horizon Teekay Tankers is expected to under-perform the SFL. In addition to that, Teekay Tankers is 1.54 times more volatile than SFL Corporation. It trades about -0.3 of its total potential returns per unit of risk. SFL Corporation is currently generating about -0.1 per unit of volatility. If you would invest  1,121  in SFL Corporation on September 14, 2024 and sell it today you would lose (96.00) from holding SFL Corporation or give up 8.56% of portfolio value over 90 days.

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

Teekay Tankers  vs.  SFL Corp.

Teekay Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teekay Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

SFL Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SFL Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's technical and fundamental indicators 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 Teekay Tankers and SFL

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

The idea behind Teekay Tankers and SFL Corporation 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.