Correlation Between Dawson Geophysical and Tenaris SA

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

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

Diversification Opportunities for Dawson Geophysical and Tenaris SA

-0.39

Correlation Coefficient

Dawson Geophysical  Tenaris SA

Very good diversification

The 3 months correlation between Dawson and Tenaris is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Dawson Geophysical 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 Dawson Geophysical 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 Dawson Geophysical 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 Dawson Geophysical i.e., Dawson Geophysical and Tenaris SA go up and down completely randomly.

Pair Corralation between Dawson Geophysical and Tenaris SA

Given the investment horizon of 90 days Dawson Geophysical is expected to under-perform the Tenaris SA. In addition to that, Dawson Geophysical is 4.74 times more volatile than Tenaris SA ADR. It trades about -0.14 of its total potential returns per unit of risk. Tenaris SA ADR is currently generating about 0.34 per unit of volatility. If you would invest  3,599  in Tenaris SA ADR on September 13, 2024 and sell it today you would earn a total of  309.00  from holding Tenaris SA ADR or generate 8.59% return on investment over 90 days.

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

Dawson Geophysical  vs.  Tenaris SA ADR

Dawson Geophysical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dawson Geophysical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dawson Geophysical is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Tenaris SA ADR

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 25 (%) 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 Dawson Geophysical and Tenaris SA

The main advantage of trading using opposite Dawson Geophysical and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dawson Geophysical 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 Dawson Geophysical 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.