Correlation Between DHT Holdings and Tsakos Energy

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

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

Diversification Opportunities for DHT Holdings and Tsakos Energy

0.75

Correlation Coefficient

DHT Holdings  Tsakos Energy

Poor diversification

The 3 months correlation between DHT and Tsakos is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding DHT Holdings and Tsakos Energy Navigation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsakos Energy Navigation and DHT Holdings 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 DHT Holdings are associated (or correlated) with Tsakos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsakos Energy Navigation has no effect on the direction of DHT Holdings i.e., DHT Holdings and Tsakos Energy go up and down completely randomly.

Pair Corralation between DHT Holdings and Tsakos Energy

Considering the 90-day investment horizon DHT Holdings is expected to generate 2.15 times less return on investment than Tsakos Energy. But when comparing it to its historical volatility, DHT Holdings is 1.06 times less risky than Tsakos Energy. It trades about 0.03 of its potential returns per unit of risk. Tsakos Energy Navigation is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,259  in Tsakos Energy Navigation on February 1, 2024 and sell it today you would earn a total of  319.00  from holding Tsakos Energy Navigation or generate 14.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

DHT Holdings  vs.  Tsakos Energy Navigation

DHT Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DHT Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, DHT Holdings may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Tsakos Energy Navigation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tsakos Energy Navigation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Tsakos Energy may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with DHT Holdings and Tsakos Energy

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

The idea behind DHT Holdings and Tsakos Energy Navigation 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.