Correlation Between TT Electronics and Tenaris SA
Can any of the company-specific risk be diversified away by investing in both TT Electronics and Tenaris SA 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 TT Electronics and Tenaris SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TT Electronics PLC and Tenaris SA, you can compare the effects of market volatilities on TT Electronics and Tenaris SA 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 TT Electronics with a short position of Tenaris SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of TT Electronics and Tenaris SA.
Diversification Opportunities for TT Electronics and Tenaris SA
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 7TT and Tenaris is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding TT Electronics PLC and Tenaris SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaris SA and TT Electronics 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 TT Electronics PLC are associated (or correlated) with Tenaris SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenaris SA has no effect on the direction of TT Electronics i.e., TT Electronics and Tenaris SA go up and down completely randomly.
Pair Corralation between TT Electronics and Tenaris SA
Assuming the 90 days trading horizon TT Electronics PLC is expected to under-perform the Tenaris SA. In addition to that, TT Electronics is 2.91 times more volatile than Tenaris SA. It trades about -0.04 of its total potential returns per unit of risk. Tenaris SA is currently generating about 0.19 per unit of volatility. If you would invest 2,521 in Tenaris SA on November 3, 2024 and sell it today you would earn a total of 1,079 from holding Tenaris SA or generate 42.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TT Electronics PLC vs. Tenaris SA
Performance |
| Timeline |
| TT Electronics PLC |
| Tenaris SA |
TT Electronics and Tenaris SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TT Electronics and Tenaris SA
The main advantage of trading using opposite TT Electronics and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TT Electronics position performs unexpectedly, Tenaris SA 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 Tenaris SA will offset losses from the drop in Tenaris SA's long position.| TT Electronics vs. Gladstone Investment | TT Electronics vs. WisdomTree Investments | TT Electronics vs. alstria office REIT AG | TT Electronics vs. Tower One Wireless |
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Check out your portfolio center.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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