Correlation Between Dynagas LNG and Tsakos Energy

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

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

Diversification Opportunities for Dynagas LNG and Tsakos Energy

0.71

Correlation Coefficient

Dynagas LNG  Tsakos Energy

Poor diversification

The 3 months correlation between Dynagas and Tsakos is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dynagas LNG Partners 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 Dynagas LNG 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 Dynagas LNG Partners 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 Dynagas LNG i.e., Dynagas LNG and Tsakos Energy go up and down completely randomly.

Pair Corralation between Dynagas LNG and Tsakos Energy

Given the investment horizon of 90 days Dynagas LNG Partners is expected to generate 0.94 times more return on investment than Tsakos Energy. However, Dynagas LNG Partners is 1.07 times less risky than Tsakos Energy. It trades about 0.16 of its potential returns per unit of risk. Tsakos Energy Navigation is currently generating about 0.08 per unit of risk. If you would invest  367.00  in Dynagas LNG Partners on July 13, 2024 and sell it today you would earn a total of  25.00  from holding Dynagas LNG Partners or generate 6.81% return on investment over 90 days.

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

Dynagas LNG Partners  vs.  Tsakos Energy Navigation

Dynagas LNG Partners

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Dynagas LNG Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dynagas LNG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Tsakos Energy Navigation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tsakos Energy Navigation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Tsakos Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dynagas LNG and Tsakos Energy

The main advantage of trading using opposite Dynagas LNG and Tsakos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynagas LNG 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 Dynagas LNG Partners 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.