Correlation Between NOV and Tenaris SA

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

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

Diversification Opportunities for NOV and Tenaris SA

0.19

Correlation Coefficient

NOV  Tenaris SA

Average diversification

The 3 months correlation between NOV and Tenaris is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc and Tenaris SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaris SA and NOV 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 NOV Inc 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 has no effect on the direction of NOV i.e., NOV and Tenaris SA go up and down completely randomly.

Pair Corralation between NOV and Tenaris SA

Considering the 90-day investment horizon NOV Inc is expected to generate 12.04 times more return on investment than Tenaris SA. However, NOV is 12.04 times more volatile than Tenaris SA. It trades about 0.04 of its potential returns per unit of risk. Tenaris SA is currently generating about 0.21 per unit of risk. If you would invest  1,473  in NOV Inc on November 28, 2024 and sell it today you would earn a total of  24.00  from holding NOV Inc or generate 1.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

NOV Inc  vs.  Tenaris SA

NOV Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days NOV Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, NOV is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Tenaris SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Tenaris SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NOV and Tenaris SA

The main advantage of trading using opposite NOV and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NOV 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 NOV Inc and Tenaris SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.