Correlation Between Tenaris SA and Bausch Lomb

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

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

Diversification Opportunities for Tenaris SA and Bausch Lomb

0.45

Correlation Coefficient

Tenaris SA  Bausch Lomb

Very weak diversification

The 3 months correlation between Tenaris and Bausch is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and Bausch Lomb Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bausch Lomb Corp and Tenaris SA 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 Tenaris SA ADR are associated (or correlated) with Bausch Lomb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bausch Lomb Corp has no effect on the direction of Tenaris SA i.e., Tenaris SA and Bausch Lomb go up and down completely randomly.

Pair Corralation between Tenaris SA and Bausch Lomb

Allowing for the 90-day total investment horizon Tenaris SA ADR is expected to generate 0.63 times more return on investment than Bausch Lomb. However, Tenaris SA ADR is 1.59 times less risky than Bausch Lomb. It trades about 0.31 of its potential returns per unit of risk. Bausch Lomb Corp is currently generating about 0.18 per unit of risk. If you would invest  2,792  in Tenaris SA ADR on September 12, 2024 and sell it today you would earn a total of  1,057  from holding Tenaris SA ADR or generate 37.86% return on investment over 90 days.

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

Tenaris SA ADR  vs.  Bausch Lomb Corp

Tenaris SA ADR

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Tenaris SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bausch Lomb Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bausch Lomb Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Bausch Lomb displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tenaris SA and Bausch Lomb

The main advantage of trading using opposite Tenaris SA and Bausch Lomb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tenaris SA position performs unexpectedly, Bausch Lomb 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 Bausch Lomb will offset losses from the drop in Bausch Lomb's long position.

The idea behind Tenaris SA ADR and Bausch Lomb Corp 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.