Correlation Between WEC Energy and Tenaris SA
Can any of the company-specific risk be diversified away by investing in both WEC Energy 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 WEC Energy and Tenaris SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WEC Energy Group and Tenaris SA ADR, you can compare the effects of market volatilities on WEC Energy 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 WEC Energy with a short position of Tenaris SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEC Energy and Tenaris SA.
Diversification Opportunities for WEC Energy and Tenaris SA
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WEC and Tenaris is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group 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 WEC 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 WEC Energy Group 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 WEC Energy i.e., WEC Energy and Tenaris SA go up and down completely randomly.
Pair Corralation between WEC Energy and Tenaris SA
Considering the 90-day investment horizon WEC Energy Group is expected to generate 0.65 times more return on investment than Tenaris SA. However, WEC Energy Group is 1.55 times less risky than Tenaris SA. It trades about 0.1 of its potential returns per unit of risk. Tenaris SA ADR is currently generating about 0.06 per unit of risk. If you would invest 7,339 in WEC Energy Group on August 25, 2024 and sell it today you would earn a total of 2,727 from holding WEC Energy Group or generate 37.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WEC Energy Group vs. Tenaris SA ADR
Performance |
| Timeline |
| WEC Energy Group |
| Tenaris SA ADR |
WEC Energy and Tenaris SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WEC Energy and Tenaris SA
The main advantage of trading using opposite WEC Energy and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEC Energy 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.| WEC Energy vs. Alliant Energy Corp | WEC Energy vs. CMS Energy | WEC Energy vs. Exelon | WEC Energy vs. Evergy, |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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