Correlation Between Tenaris SA and ChampionX

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

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

Diversification Opportunities for Tenaris SA and ChampionX

0.68

Correlation Coefficient

Tenaris SA  ChampionX

Poor diversification

The 3 months correlation between Tenaris and ChampionX is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA and ChampionX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChampionX 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 ChampionX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChampionX has no effect on the direction of Tenaris SA i.e., Tenaris SA and ChampionX go up and down completely randomly.

Pair Corralation between Tenaris SA and ChampionX

Assuming the 90 days horizon Tenaris SA is expected to generate 0.89 times more return on investment than ChampionX. However, Tenaris SA is 1.12 times less risky than ChampionX. It trades about 0.05 of its potential returns per unit of risk. ChampionX is currently generating about -0.01 per unit of risk. If you would invest  2,901  in Tenaris SA on September 12, 2024 and sell it today you would earn a total of  739.00  from holding Tenaris SA or generate 25.47% return on investment over 90 days.

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

Tenaris SA  vs.  ChampionX

Tenaris SA

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tenaris SA reported solid returns over the last few months and may actually be approaching a breakup point.

ChampionX

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ChampionX are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ChampionX may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tenaris SA and ChampionX

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

The idea behind Tenaris SA and ChampionX 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.