Correlation Between Valaris and Tenaris SA

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

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

Diversification Opportunities for Valaris and Tenaris SA

-0.8

Correlation Coefficient

Valaris  Tenaris SA

Pay attention - limited upside

The 3 months correlation between Valaris and Tenaris is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Valaris and Tenaris SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaris SA ADR and Valaris 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 Valaris are associated (or correlated) with Tenaris SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenaris SA ADR has no effect on the direction of Valaris i.e., Valaris and Tenaris SA go up and down completely randomly.

Pair Corralation between Valaris and Tenaris SA

Considering the 90-day investment horizon Valaris is expected to under-perform the Tenaris SA. In addition to that, Valaris is 1.89 times more volatile than Tenaris SA ADR. It trades about -0.25 of its total potential returns per unit of risk. Tenaris SA ADR is currently generating about -0.04 per unit of volatility. If you would invest  3,767  in Tenaris SA ADR on September 24, 2024 and sell it today you would lose (48.00) from holding Tenaris SA ADR or give up 1.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Valaris  vs.  Tenaris SA ADR

Valaris

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valaris has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Tenaris SA ADR

Risk-Adjusted Performance

15 of 100

Solid

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.

Pair Trading with Valaris and Tenaris SA

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

The idea behind Valaris and Tenaris SA ADR 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 Transaction History module to view history of all your transactions and understand their impact on performance.