Correlation Between Tenaris SA and Toro Energy

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

Diversification Opportunities for Tenaris SA and Toro Energy

-0.08

Correlation Coefficient

Tenaris SA  Toro Energy

Good diversification

The 3 months correlation between Tenaris and Toro is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and Toro Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro Energy Limited 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 Toro Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro Energy Limited has no effect on the direction of Tenaris SA i.e., Tenaris SA and Toro Energy go up and down completely randomly.

Pair Corralation between Tenaris SA and Toro Energy

Allowing for the 90-day total investment horizon Tenaris SA ADR is expected to under-perform the Toro Energy. But the stock apears to be less risky and, when comparing its historical volatility, Tenaris SA ADR is 21.62 times less risky than Toro Energy. The stock trades about -0.13 of its potential returns per unit of risk. The Toro Energy Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Toro Energy Limited on October 8, 2024 and sell it today you would earn a total of  1.00  from holding Toro Energy Limited or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.95%
Values	Daily Returns

Tenaris SA ADR  vs.  Toro Energy Limited

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.

Toro Energy Limited

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Toro Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Toro Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tenaris SA and Toro Energy

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

The idea behind Tenaris SA ADR and Toro Energy Limited 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..