Correlation Between Schlumberger and Tenaris SA

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

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

Diversification Opportunities for Schlumberger and Tenaris SA

0.25

Correlation Coefficient

Schlumberger  Tenaris SA

Modest diversification

The 3 months correlation between Schlumberger and Tenaris is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Schlumberger NV 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 Schlumberger 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 Schlumberger NV 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 Schlumberger i.e., Schlumberger and Tenaris SA go up and down completely randomly.

Pair Corralation between Schlumberger and Tenaris SA

Considering the 90-day investment horizon Schlumberger NV is expected to generate 0.93 times more return on investment than Tenaris SA. However, Schlumberger NV is 1.08 times less risky than Tenaris SA. It trades about -0.11 of its potential returns per unit of risk. Tenaris SA ADR is currently generating about -0.13 per unit of risk. If you would invest  4,225  in Schlumberger NV on November 28, 2024 and sell it today you would lose (165.00) from holding Schlumberger NV or give up 3.91% of portfolio value over 90 days.

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

Schlumberger NV  vs.  Tenaris SA ADR

Schlumberger NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schlumberger NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Schlumberger is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Tenaris SA ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tenaris SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Schlumberger and Tenaris SA

The main advantage of trading using opposite Schlumberger and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schlumberger 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 Schlumberger NV 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.