Correlation Between Tenaris SA and Northstar Clean

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

Diversification Opportunities for Tenaris SA and Northstar Clean

0.19

Correlation Coefficient

Tenaris SA  Northstar Clean

Average diversification

The 3 months correlation between Tenaris and Northstar is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and Northstar Clean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northstar Clean Tech 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 Northstar Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northstar Clean Tech has no effect on the direction of Tenaris SA i.e., Tenaris SA and Northstar Clean go up and down completely randomly.

Pair Corralation between Tenaris SA and Northstar Clean

Allowing for the 90-day total investment horizon Tenaris SA is expected to generate 1.45 times less return on investment than Northstar Clean. But when comparing it to its historical volatility, Tenaris SA ADR is 2.35 times less risky than Northstar Clean. It trades about 0.06 of its potential returns per unit of risk. Northstar Clean Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Northstar Clean Technologies on December 22, 2024 and sell it today you would earn a total of  1.00  from holding Northstar Clean Technologies or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Tenaris SA ADR  vs.  Northstar Clean Technologies

Tenaris SA ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Northstar Clean Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Northstar Clean may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tenaris SA and Northstar Clean

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

The idea behind Tenaris SA ADR and Northstar Clean 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.