Correlation Between Pembina Pipeline and Tsakos Energy

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

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

Diversification Opportunities for Pembina Pipeline and Tsakos Energy

-0.04

Correlation Coefficient

Pembina Pipeline  Tsakos Energy

Good diversification

The 3 months correlation between Pembina and Tsakos is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp 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 Pembina Pipeline 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 Pembina Pipeline Corp 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 Pembina Pipeline i.e., Pembina Pipeline and Tsakos Energy go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Tsakos Energy

Considering the 90-day investment horizon Pembina Pipeline Corp is expected to generate 0.35 times more return on investment than Tsakos Energy. However, Pembina Pipeline Corp is 2.84 times less risky than Tsakos Energy. It trades about 0.39 of its potential returns per unit of risk. Tsakos Energy Navigation is currently generating about 0.06 per unit of risk. If you would invest  3,982  in Pembina Pipeline Corp on July 13, 2024 and sell it today you would earn a total of  254.00  from holding Pembina Pipeline Corp or generate 6.38% return on investment over 90 days.

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

Pembina Pipeline Corp  vs.  Tsakos Energy Navigation

Pembina Pipeline Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Pembina Pipeline sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Pembina Pipeline and Tsakos Energy

The main advantage of trading using opposite Pembina Pipeline and Tsakos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline 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 Pembina Pipeline Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.