Correlation Between Tenaris SA and WESTAR

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

Diversification Opportunities for Tenaris SA and WESTAR

0.0

Correlation Coefficient

Tenaris SA  WESTAR

Pay attention - limited upside

The 3 months correlation between Tenaris and WESTAR is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and WESTAR ENERGY INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTAR ENERGY INC 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 WESTAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTAR ENERGY INC has no effect on the direction of Tenaris SA i.e., Tenaris SA and WESTAR go up and down completely randomly.

Pair Corralation between Tenaris SA and WESTAR

Allowing for the 90-day total investment horizon Tenaris SA ADR is expected to under-perform the WESTAR. In addition to that, Tenaris SA is 5.9 times more volatile than WESTAR ENERGY INC. It trades about -0.01 of its total potential returns per unit of risk. WESTAR ENERGY INC is currently generating about 0.08 per unit of volatility. If you would invest  9,706  in WESTAR ENERGY INC on November 29, 2024 and sell it today you would earn a total of  41.00  from holding WESTAR ENERGY INC or generate 0.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	38.33%
Values	Daily Returns

Tenaris SA ADR  vs.  WESTAR ENERGY INC

Tenaris SA ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tenaris SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

WESTAR ENERGY INC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WESTAR ENERGY INC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, WESTAR is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tenaris SA and WESTAR

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

The idea behind Tenaris SA ADR and WESTAR ENERGY INC 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.