Correlation Between NPK International and Tenaris SA

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

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

Diversification Opportunities for NPK International and Tenaris SA

0.54

Correlation Coefficient

NPK International  Tenaris SA

Very weak diversification

The 3 months correlation between NPK and Tenaris is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding NPK International 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 NPK International 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 NPK International 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 NPK International i.e., NPK International and Tenaris SA go up and down completely randomly.

Pair Corralation between NPK International and Tenaris SA

Given the investment horizon of 90 days NPK International is expected to under-perform the Tenaris SA. In addition to that, NPK International is 1.42 times more volatile than Tenaris SA ADR. It trades about -0.14 of its total potential returns per unit of risk. Tenaris SA ADR is currently generating about 0.03 per unit of volatility. If you would invest  3,813  in Tenaris SA ADR on December 17, 2024 and sell it today you would earn a total of  65.00  from holding Tenaris SA ADR or generate 1.7% return on investment over 90 days.

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

NPK International  vs.  Tenaris SA ADR

NPK International

Risk-Adjusted Performance

Very Weak

Over the last 90 days NPK International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Tenaris SA ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Tenaris SA is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NPK International and Tenaris SA

The main advantage of trading using opposite NPK International and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NPK International 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 NPK International 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.