Correlation Between Tenaris SA and Geospace Technologies

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

Diversification Opportunities for Tenaris SA and Geospace Technologies

0.41

Correlation Coefficient

Tenaris SA  Geospace Technologies

Very weak diversification

The 3 months correlation between Tenaris and Geospace is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and Geospace Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geospace Technologies 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 Geospace Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geospace Technologies has no effect on the direction of Tenaris SA i.e., Tenaris SA and Geospace Technologies go up and down completely randomly.

Pair Corralation between Tenaris SA and Geospace Technologies

Allowing for the 90-day total investment horizon Tenaris SA ADR is expected to generate 0.26 times more return on investment than Geospace Technologies. However, Tenaris SA ADR is 3.92 times less risky than Geospace Technologies. It trades about 0.22 of its potential returns per unit of risk. Geospace Technologies is currently generating about -0.27 per unit of risk. If you would invest  3,643  in Tenaris SA ADR on September 15, 2024 and sell it today you would earn a total of  215.00  from holding Tenaris SA ADR or generate 5.9% 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.  Geospace Technologies

Tenaris SA ADR

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 23 (%) 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.

Geospace Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tenaris SA and Geospace Technologies

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

The idea behind Tenaris SA ADR and Geospace Technologies 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 Stocks Directory module to find actively traded stocks across global markets.