Correlation Between Tenaris SA and Schlumberger

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

Diversification Opportunities for Tenaris SA and Schlumberger

0.47

Correlation Coefficient

Tenaris SA  Schlumberger

Very weak diversification

The 3 months correlation between Tenaris and Schlumberger is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and Schlumberger NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger NV 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 Schlumberger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schlumberger NV has no effect on the direction of Tenaris SA i.e., Tenaris SA and Schlumberger go up and down completely randomly.

Pair Corralation between Tenaris SA and Schlumberger

Allowing for the 90-day total investment horizon Tenaris SA is expected to generate 2.54 times less return on investment than Schlumberger. But when comparing it to its historical volatility, Tenaris SA ADR is 1.13 times less risky than Schlumberger. It trades about 0.05 of its potential returns per unit of risk. Schlumberger NV is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,755  in Schlumberger NV on December 30, 2024 and sell it today you would earn a total of  433.00  from holding Schlumberger NV or generate 11.53% 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.  Schlumberger NV

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 3 (%) 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.

Schlumberger NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schlumberger NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Schlumberger may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tenaris SA and Schlumberger

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

The idea behind Tenaris SA ADR and Schlumberger NV 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.