Correlation Between Tenaris SA and Flutter Entertainment

Can any of the company-specific risk be diversified away by investing in both Tenaris SA and Flutter Entertainment 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 Flutter Entertainment 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 Flutter Entertainment plc, you can compare the effects of market volatilities on Tenaris SA and Flutter Entertainment 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 Flutter Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tenaris SA and Flutter Entertainment.

Diversification Opportunities for Tenaris SA and Flutter Entertainment

0.92

Correlation Coefficient

Tenaris SA  Flutter Entertainment

Almost no diversification

The 3 months correlation between Tenaris and Flutter is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and Flutter Entertainment plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flutter Entertainment plc 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 Flutter Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flutter Entertainment plc has no effect on the direction of Tenaris SA i.e., Tenaris SA and Flutter Entertainment go up and down completely randomly.

Pair Corralation between Tenaris SA and Flutter Entertainment

Allowing for the 90-day total investment horizon Tenaris SA is expected to generate 1.8 times less return on investment than Flutter Entertainment. But when comparing it to its historical volatility, Tenaris SA ADR is 1.4 times less risky than Flutter Entertainment. It trades about 0.07 of its potential returns per unit of risk. Flutter Entertainment plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  16,675  in Flutter Entertainment plc on October 9, 2024 and sell it today you would earn a total of  8,837  from holding Flutter Entertainment plc or generate 53.0% return on investment over 90 days.

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

Tenaris SA ADR  vs.  Flutter Entertainment plc

Tenaris SA ADR

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 15 (%) 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.

Flutter Entertainment plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Flutter Entertainment plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Flutter Entertainment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tenaris SA and Flutter Entertainment

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

The idea behind Tenaris SA ADR and Flutter Entertainment plc 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.