Correlation Between Now and Tenaris SA
Can any of the company-specific risk be diversified away by investing in both Now 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 Now and Tenaris SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Now Inc and Tenaris SA ADR, you can compare the effects of market volatilities on Now 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 Now with a short position of Tenaris SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now and Tenaris SA.
Diversification Opportunities for Now and Tenaris SA
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Now and Tenaris is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Tenaris SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaris SA ADR and Now 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 Now Inc 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 ADR has no effect on the direction of Now i.e., Now and Tenaris SA go up and down completely randomly.
Pair Corralation between Now and Tenaris SA
Given the investment horizon of 90 days Now Inc is expected to generate 1.57 times more return on investment than Tenaris SA. However, Now is 1.57 times more volatile than Tenaris SA ADR. It trades about 0.34 of its potential returns per unit of risk. Tenaris SA ADR is currently generating about 0.38 per unit of risk. If you would invest 1,198 in Now Inc on August 27, 2024 and sell it today you would earn a total of 301.00 from holding Now Inc or generate 25.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Now Inc vs. Tenaris SA ADR
Performance |
| Timeline |
| Now Inc |
| Tenaris SA ADR |
Now and Tenaris SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Now and Tenaris SA
The main advantage of trading using opposite Now and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Now 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.The idea behind Now Inc and Tenaris SA ADR 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.| Tenaris SA vs. TechnipFMC PLC | Tenaris SA vs. Now Inc | Tenaris SA vs. ChampionX | Tenaris SA vs. Baker Hughes Co |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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