Correlation Between Liberty Oilfield and Tenaris SA

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

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

Diversification Opportunities for Liberty Oilfield and Tenaris SA

0.1

Correlation Coefficient

Liberty Oilfield  Tenaris SA

Average diversification

The 3 months correlation between Liberty and Tenaris is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Oilfield Services 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 Liberty Oilfield 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 Liberty Oilfield Services 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 Liberty Oilfield i.e., Liberty Oilfield and Tenaris SA go up and down completely randomly.

Pair Corralation between Liberty Oilfield and Tenaris SA

Given the investment horizon of 90 days Liberty Oilfield Services is expected to generate 1.91 times more return on investment than Tenaris SA. However, Liberty Oilfield is 1.91 times more volatile than Tenaris SA ADR. It trades about 0.31 of its potential returns per unit of risk. Tenaris SA ADR is currently generating about -0.01 per unit of risk. If you would invest  1,917  in Liberty Oilfield Services on October 13, 2024 and sell it today you would earn a total of  223.00  from holding Liberty Oilfield Services or generate 11.63% return on investment over 90 days.

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

Liberty Oilfield Services  vs.  Tenaris SA ADR

Liberty Oilfield Services

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Oilfield Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Liberty Oilfield may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tenaris SA ADR

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 15 (%) 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 Liberty Oilfield and Tenaris SA

The main advantage of trading using opposite Liberty Oilfield and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Oilfield 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 Liberty Oilfield Services 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.