Correlation Between Weibo Corp and Tenaris SA

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

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

Diversification Opportunities for Weibo Corp and Tenaris SA

-0.03

Correlation Coefficient

Weibo Corp  Tenaris SA

Good diversification

The 3 months correlation between Weibo and Tenaris is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp 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 Weibo Corp 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 Weibo Corp 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 Weibo Corp i.e., Weibo Corp and Tenaris SA go up and down completely randomly.

Pair Corralation between Weibo Corp and Tenaris SA

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 1.8 times more return on investment than Tenaris SA. However, Weibo Corp is 1.8 times more volatile than Tenaris SA ADR. It trades about -0.02 of its potential returns per unit of risk. Tenaris SA ADR is currently generating about -0.13 per unit of risk. If you would invest  1,006  in Weibo Corp on December 5, 2024 and sell it today you would lose (20.00) from holding Weibo Corp or give up 1.99% of portfolio value over 90 days.

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

Weibo Corp  vs.  Tenaris SA ADR

Weibo Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Weibo Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Weibo Corp and Tenaris SA

The main advantage of trading using opposite Weibo Corp and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp 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 Weibo Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.