Correlation Between Tsakos Energy and NuStar Energy

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

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

Diversification Opportunities for Tsakos Energy and NuStar Energy

-0.49

Correlation Coefficient

Tsakos Energy  NuStar Energy

Very good diversification

The 3 months correlation between Tsakos and NuStar is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Tsakos Energy Navigation and NuStar Energy LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuStar Energy LP and Tsakos Energy 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 Tsakos Energy Navigation are associated (or correlated) with NuStar Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuStar Energy LP has no effect on the direction of Tsakos Energy i.e., Tsakos Energy and NuStar Energy go up and down completely randomly.

Pair Corralation between Tsakos Energy and NuStar Energy

Assuming the 90 days trading horizon Tsakos Energy Navigation is expected to generate 0.59 times more return on investment than NuStar Energy. However, Tsakos Energy Navigation is 1.69 times less risky than NuStar Energy. It trades about 0.26 of its potential returns per unit of risk. NuStar Energy LP is currently generating about -0.18 per unit of risk. If you would invest  2,581  in Tsakos Energy Navigation on March 2, 2024 and sell it today you would earn a total of  49.00  from holding Tsakos Energy Navigation or generate 1.9% return on investment over 90 days.

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

Tsakos Energy Navigation  vs.  NuStar Energy LP

Tsakos Energy Navigation

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tsakos Energy Navigation are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Tsakos Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

NuStar Energy LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NuStar Energy LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, NuStar Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tsakos Energy and NuStar Energy

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

The idea behind Tsakos Energy Navigation and NuStar Energy LP 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.