Correlation Between Pembina Pipeline and Tenaris SA

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

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

Diversification Opportunities for Pembina Pipeline and Tenaris SA

-0.32

Correlation Coefficient

Pembina Pipeline  Tenaris SA

Very good diversification

The 3 months correlation between Pembina and Tenaris is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline 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 Pembina Pipeline 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 Pembina Pipeline 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 Pembina Pipeline i.e., Pembina Pipeline and Tenaris SA go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Tenaris SA

Assuming the 90 days horizon Pembina Pipeline is expected to generate 7.95 times less return on investment than Tenaris SA. But when comparing it to its historical volatility, Pembina Pipeline is 8.55 times less risky than Tenaris SA. It trades about 0.08 of its potential returns per unit of risk. Tenaris SA ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,746  in Tenaris SA ADR on December 21, 2024 and sell it today you would earn a total of  244.00  from holding Tenaris SA ADR or generate 6.51% return on investment over 90 days.

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

Pembina Pipeline  vs.  Tenaris SA ADR

Pembina Pipeline

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Pembina Pipeline is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Tenaris SA ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 5 (%) 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 Pembina Pipeline and Tenaris SA

The main advantage of trading using opposite Pembina Pipeline and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline 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 Pembina Pipeline 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.