Correlation Between Tenaris SA and Nabors Industries

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

Diversification Opportunities for Tenaris SA and Nabors Industries

0.56

Correlation Coefficient

Tenaris SA  Nabors Industries

Very weak diversification

The 3 months correlation between Tenaris and Nabors is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries 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 Nabors Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Industries has no effect on the direction of Tenaris SA i.e., Tenaris SA and Nabors Industries go up and down completely randomly.

Pair Corralation between Tenaris SA and Nabors Industries

Allowing for the 90-day total investment horizon Tenaris SA ADR is expected to generate 0.56 times more return on investment than Nabors Industries. However, Tenaris SA ADR is 1.78 times less risky than Nabors Industries. It trades about 0.02 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.04 per unit of risk. If you would invest  3,317  in Tenaris SA ADR on February 6, 2024 and sell it today you would earn a total of  63.00  from holding Tenaris SA ADR or generate 1.9% return on investment over 90 days.

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

Tenaris SA ADR  vs.  Nabors Industries

Tenaris SA ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Tenaris SA may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Nabors Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nabors Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Tenaris SA and Nabors Industries

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

The idea behind Tenaris SA ADR and Nabors Industries 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.