Correlation Between Tenaris SA and Small Cap
Can any of the company-specific risk be diversified away by investing in both Tenaris SA and Small Cap 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 Small Cap 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 Small Cap Premium, you can compare the effects of market volatilities on Tenaris SA and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tenaris SA and Small Cap.
Diversification Opportunities for Tenaris SA and Small Cap
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tenaris and Small is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of Tenaris SA i.e., Tenaris SA and Small Cap go up and down completely randomly.
Pair Corralation between Tenaris SA and Small Cap
Allowing for the 90-day total investment horizon Tenaris SA ADR is expected to generate 3.28 times more return on investment than Small Cap. However, Tenaris SA is 3.28 times more volatile than Small Cap Premium. It trades about 0.43 of its potential returns per unit of risk. Small Cap Premium is currently generating about 0.01 per unit of risk. If you would invest 3,094 in Tenaris SA ADR on August 25, 2024 and sell it today you would earn a total of 648.00 from holding Tenaris SA ADR or generate 20.94% 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. Small Cap Premium
Performance |
| Timeline |
| Tenaris SA ADR |
| Small Cap Premium |
Tenaris SA and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tenaris SA and Small Cap
The main advantage of trading using opposite Tenaris SA and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tenaris SA position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Tenaris SA vs. TechnipFMC PLC | Tenaris SA vs. Now Inc | Tenaris SA vs. ChampionX | Tenaris SA vs. Baker Hughes Co |
| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. Voya Global Advantage | Small Cap vs. Ready Capital |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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