Correlation Between Tenaris SA and NL Industries
Can any of the company-specific risk be diversified away by investing in both Tenaris SA and NL Industries 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 Tenaris SA and NL Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tenaris SA ADR and NL Industries, you can compare the effects of market volatilities on Tenaris SA and NL Industries 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 Tenaris SA with a short position of NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tenaris SA and NL Industries.
Diversification Opportunities for Tenaris SA and NL Industries
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tenaris and NL Industries is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries and Tenaris SA 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 Tenaris SA ADR are associated (or correlated) with NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of Tenaris SA i.e., Tenaris SA and NL Industries go up and down completely randomly.
Pair Corralation between Tenaris SA and NL Industries
Allowing for the 90-day total investment horizon Tenaris SA ADR is expected to generate 0.57 times more return on investment than NL Industries. However, Tenaris SA ADR is 1.77 times less risky than NL Industries. It trades about 0.32 of its potential returns per unit of risk. NL Industries is currently generating about 0.15 per unit of risk. If you would invest 2,792 in Tenaris SA ADR on September 12, 2024 and sell it today you would earn a total of 1,116 from holding Tenaris SA ADR or generate 39.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tenaris SA ADR vs. NL Industries
Performance |
| Timeline |
| Tenaris SA ADR |
| NL Industries |
Tenaris SA and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tenaris SA and NL Industries
The main advantage of trading using opposite Tenaris SA and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tenaris SA position performs unexpectedly, NL Industries 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 NL Industries will offset losses from the drop in NL Industries' long position.| Tenaris SA vs. TechnipFMC PLC | Tenaris SA vs. Now Inc | Tenaris SA vs. ChampionX | Tenaris SA vs. Baker Hughes Co |
| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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