Correlation Between Solstad Offshore and Tenaris SA

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

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

Diversification Opportunities for Solstad Offshore and Tenaris SA

0.82

Correlation Coefficient

Solstad Offshore  Tenaris SA

Very poor diversification

The 3 months correlation between Solstad and Tenaris is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and Tenaris SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaris SA and Solstad Offshore 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 Solstad Offshore ASA 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 Solstad Offshore i.e., Solstad Offshore and Tenaris SA go up and down completely randomly.

Pair Corralation between Solstad Offshore and Tenaris SA

Assuming the 90 days trading horizon Solstad Offshore ASA is expected to under-perform the Tenaris SA. In addition to that, Solstad Offshore is 1.12 times more volatile than Tenaris SA. It trades about -0.02 of its total potential returns per unit of risk. Tenaris SA is currently generating about 0.0 per unit of volatility. If you would invest  3,600  in Tenaris SA on December 31, 2024 and sell it today you would lose (20.00) from holding Tenaris SA or give up 0.56% of portfolio value over 90 days.

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

Solstad Offshore ASA  vs.  Tenaris SA

Solstad Offshore ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Solstad Offshore is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Tenaris SA

Risk-Adjusted Performance

Very Weak

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

The main advantage of trading using opposite Solstad Offshore and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solstad Offshore 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 Solstad Offshore ASA 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.