Correlation Between Tenaris SA and Prosafe SE

Can any of the company-specific risk be diversified away by investing in both Tenaris SA and Prosafe SE 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 Prosafe SE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tenaris SA and Prosafe SE, you can compare the effects of market volatilities on Tenaris SA and Prosafe SE 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 Prosafe SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tenaris SA and Prosafe SE.

Diversification Opportunities for Tenaris SA and Prosafe SE

0.51

Correlation Coefficient

Tenaris SA  Prosafe SE

Very weak diversification

The 3 months correlation between Tenaris and Prosafe is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA and Prosafe SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosafe SE 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 are associated (or correlated) with Prosafe SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosafe SE has no effect on the direction of Tenaris SA i.e., Tenaris SA and Prosafe SE go up and down completely randomly.

Pair Corralation between Tenaris SA and Prosafe SE

Assuming the 90 days horizon Tenaris SA is expected to generate 216.71 times less return on investment than Prosafe SE. But when comparing it to its historical volatility, Tenaris SA is 9.34 times less risky than Prosafe SE. It trades about 0.0 of its potential returns per unit of risk. Prosafe SE is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Prosafe SE on December 30, 2024 and sell it today you would earn a total of  5.00  from holding Prosafe SE or generate 9.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Tenaris SA  vs.  Prosafe SE

Tenaris SA

Risk-Adjusted Performance

Weak

Over the last 90 days Tenaris SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tenaris SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Prosafe SE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prosafe SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prosafe SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tenaris SA and Prosafe SE

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

The idea behind Tenaris SA and Prosafe SE 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.