Correlation Between Teekay and Enterprise Products

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

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

Diversification Opportunities for Teekay and Enterprise Products

-0.38

Correlation Coefficient

Teekay  Enterprise Products

Very good diversification

The 3 months correlation between Teekay and Enterprise is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Teekay and Enterprise Products Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Products and Teekay 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 are associated (or correlated) with Enterprise Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Products has no effect on the direction of Teekay i.e., Teekay and Enterprise Products go up and down completely randomly.

Pair Corralation between Teekay and Enterprise Products

Allowing for the 90-day total investment horizon Teekay is expected to generate 1.21 times less return on investment than Enterprise Products. In addition to that, Teekay is 3.53 times more volatile than Enterprise Products Partners. It trades about 0.05 of its total potential returns per unit of risk. Enterprise Products Partners is currently generating about 0.23 per unit of volatility. If you would invest  2,604  in Enterprise Products Partners on February 12, 2024 and sell it today you would earn a total of  276.00  from holding Enterprise Products Partners or generate 10.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Teekay  vs.  Enterprise Products Partners

Teekay

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Teekay are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Teekay may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Enterprise Products

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Products Partners are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Enterprise Products may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Teekay and Enterprise Products

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

The idea behind Teekay and Enterprise Products Partners 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.