Correlation Between Herc Holdings and Tenaris SA

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

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

Diversification Opportunities for Herc Holdings and Tenaris SA

0.77

Correlation Coefficient

Herc Holdings  Tenaris SA

Poor diversification

The 3 months correlation between Herc and Tenaris is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings 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 Herc Holdings 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 Herc Holdings 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 Herc Holdings i.e., Herc Holdings and Tenaris SA go up and down completely randomly.

Pair Corralation between Herc Holdings and Tenaris SA

Considering the 90-day investment horizon Herc Holdings is expected to generate 1.07 times less return on investment than Tenaris SA. In addition to that, Herc Holdings is 1.97 times more volatile than Tenaris SA ADR. It trades about 0.1 of its total potential returns per unit of risk. Tenaris SA ADR is currently generating about 0.2 per unit of volatility. If you would invest  3,021  in Tenaris SA ADR on September 24, 2024 and sell it today you would earn a total of  698.00  from holding Tenaris SA ADR or generate 23.1% return on investment over 90 days.

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

Herc Holdings  vs.  Tenaris SA ADR

Herc Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Tenaris SA ADR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 16 (%) 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 Herc Holdings and Tenaris SA

The main advantage of trading using opposite Herc Holdings and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herc Holdings 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 Herc Holdings 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.