Correlation Between Imperial Oil and Tenaris SA

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

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

Diversification Opportunities for Imperial Oil and Tenaris SA

0.46

Correlation Coefficient

Imperial Oil  Tenaris SA

Very weak diversification

The 3 months correlation between Imperial and Tenaris is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Oil 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 Imperial Oil 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 Imperial Oil 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 Imperial Oil i.e., Imperial Oil and Tenaris SA go up and down completely randomly.

Pair Corralation between Imperial Oil and Tenaris SA

Considering the 90-day investment horizon Imperial Oil is expected to generate 1.2 times more return on investment than Tenaris SA. However, Imperial Oil is 1.2 times more volatile than Tenaris SA ADR. It trades about 0.13 of its potential returns per unit of risk. Tenaris SA ADR is currently generating about 0.09 per unit of risk. If you would invest  6,126  in Imperial Oil on December 20, 2024 and sell it today you would earn a total of  906.00  from holding Imperial Oil or generate 14.79% return on investment over 90 days.

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

Imperial Oil  vs.  Tenaris SA ADR

Imperial Oil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Oil are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Imperial Oil displayed solid returns over the last few months and may actually be approaching a breakup point.

Tenaris SA ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Tenaris SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Imperial Oil and Tenaris SA

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

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.