Correlation Between Tenaris SA and Texas Gulf

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

Diversification Opportunities for Tenaris SA and Texas Gulf

-0.64

Correlation Coefficient

Tenaris SA  Texas Gulf

Excellent diversification

The 3 months correlation between Tenaris and Texas is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and Texas Gulf Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Gulf Energy 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 Texas Gulf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Gulf Energy has no effect on the direction of Tenaris SA i.e., Tenaris SA and Texas Gulf go up and down completely randomly.

Pair Corralation between Tenaris SA and Texas Gulf

Allowing for the 90-day total investment horizon Tenaris SA ADR is expected to generate 0.82 times more return on investment than Texas Gulf. However, Tenaris SA ADR is 1.22 times less risky than Texas Gulf. It trades about 0.2 of its potential returns per unit of risk. Texas Gulf Energy is currently generating about 0.02 per unit of risk. If you would invest  3,176  in Tenaris SA ADR on October 14, 2024 and sell it today you would earn a total of  667.00  from holding Tenaris SA ADR or generate 21.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Tenaris SA ADR  vs.  Texas Gulf Energy

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.

Texas Gulf Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Gulf Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Texas Gulf is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tenaris SA and Texas Gulf

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

The idea behind Tenaris SA ADR and Texas Gulf Energy 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.