Correlation Between Cactus and Tenaris SA
Can any of the company-specific risk be diversified away by investing in both Cactus 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 Cactus and Tenaris SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cactus Inc and Tenaris SA ADR, you can compare the effects of market volatilities on Cactus 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 Cactus with a short position of Tenaris SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cactus and Tenaris SA.
Diversification Opportunities for Cactus and Tenaris SA
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cactus and Tenaris is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cactus 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 Cactus 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 Cactus 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 Cactus i.e., Cactus and Tenaris SA go up and down completely randomly.
Pair Corralation between Cactus and Tenaris SA
Considering the 90-day investment horizon Cactus Inc is expected to generate 1.32 times more return on investment than Tenaris SA. However, Cactus is 1.32 times more volatile than Tenaris SA ADR. It trades about 0.04 of its potential returns per unit of risk. Tenaris SA ADR is currently generating about 0.03 per unit of risk. If you would invest 5,007 in Cactus Inc on August 27, 2024 and sell it today you would earn a total of 1,892 from holding Cactus Inc or generate 37.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cactus Inc vs. Tenaris SA ADR
Performance |
| Timeline |
| Cactus Inc |
| Tenaris SA ADR |
Cactus and Tenaris SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cactus and Tenaris SA
The main advantage of trading using opposite Cactus and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cactus 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.| Cactus vs. ChampionX | Cactus vs. Expro Group Holdings | Cactus vs. Ranger Energy Services | Cactus vs. MRC Global |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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