Correlation Between Scorpio Tankers and International Seaways

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

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

Diversification Opportunities for Scorpio Tankers and International Seaways

0.92

Correlation Coefficient

Scorpio Tankers  International Seaways

Almost no diversification

The 3 months correlation between Scorpio and International is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Scorpio Tankers and International Seaways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Seaways and Scorpio 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 Scorpio Tankers are associated (or correlated) with International Seaways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Seaways has no effect on the direction of Scorpio Tankers i.e., Scorpio Tankers and International Seaways go up and down completely randomly.

Pair Corralation between Scorpio Tankers and International Seaways

Given the investment horizon of 90 days Scorpio Tankers is expected to generate 1.08 times less return on investment than International Seaways. But when comparing it to its historical volatility, Scorpio Tankers is 1.32 times less risky than International Seaways. It trades about 0.56 of its potential returns per unit of risk. International Seaways is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  5,360  in International Seaways on February 21, 2024 and sell it today you would earn a total of  1,043  from holding International Seaways or generate 19.46% return on investment over 90 days.

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

Scorpio Tankers  vs.  International Seaways

Scorpio Tankers

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Scorpio Tankers are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Scorpio Tankers reported solid returns over the last few months and may actually be approaching a breakup point.

International Seaways

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Seaways are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, International Seaways showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scorpio Tankers and International Seaways

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

The idea behind Scorpio Tankers and International Seaways 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.