Correlation Between GMO Internet and Tenaris SA
Can any of the company-specific risk be diversified away by investing in both GMO Internet 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 GMO Internet and Tenaris SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMO Internet and Tenaris SA ADR, you can compare the effects of market volatilities on GMO Internet 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 GMO Internet with a short position of Tenaris SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Internet and Tenaris SA.
Diversification Opportunities for GMO Internet and Tenaris SA
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GMO and Tenaris is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet 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 GMO Internet 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 GMO Internet 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 GMO Internet i.e., GMO Internet and Tenaris SA go up and down completely randomly.
Pair Corralation between GMO Internet and Tenaris SA
Assuming the 90 days horizon GMO Internet is expected to generate 1.28 times more return on investment than Tenaris SA. However, GMO Internet is 1.28 times more volatile than Tenaris SA ADR. It trades about 0.16 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 1,775 in GMO Internet on December 18, 2024 and sell it today you would earn a total of 356.00 from holding GMO Internet or generate 20.06% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 98.33% |
Values | Daily Returns |
GMO Internet vs. Tenaris SA ADR
Performance |
Timeline |
GMO Internet |
Tenaris SA ADR |
GMO Internet and Tenaris SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GMO Internet and Tenaris SA
The main advantage of trading using opposite GMO Internet and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMO Internet 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.GMO Internet vs. Cable One | GMO Internet vs. Charter Communications | GMO Internet vs. Frontier Communications Parent | GMO Internet vs. Liberty Broadband Srs |
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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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