Correlation Between BCE and Tenaris SA

Can any of the company-specific risk be diversified away by investing in both BCE 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 BCE and Tenaris SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BCE Inc and Tenaris SA ADR, you can compare the effects of market volatilities on BCE 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 BCE with a short position of Tenaris SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and Tenaris SA.

Diversification Opportunities for BCE and Tenaris SA

-0.93

Correlation Coefficient

BCE  Tenaris SA

Pay attention - limited upside

The 3 months correlation between BCE and Tenaris is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding BCE 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 BCE 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 BCE 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 BCE i.e., BCE and Tenaris SA go up and down completely randomly.

Pair Corralation between BCE and Tenaris SA

Considering the 90-day investment horizon BCE Inc is expected to under-perform the Tenaris SA. But the stock apears to be less risky and, when comparing its historical volatility, BCE Inc is 1.66 times less risky than Tenaris SA. The stock trades about -0.1 of its potential returns per unit of risk. The Tenaris SA ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,079  in Tenaris SA ADR on September 29, 2024 and sell it today you would earn a total of  691.00  from holding Tenaris SA ADR or generate 22.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BCE Inc  vs.  Tenaris SA ADR

BCE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Tenaris SA ADR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Tenaris SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BCE and Tenaris SA

The main advantage of trading using opposite BCE and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE 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 BCE 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.