Correlation Between Tenaris SA and Flotek Industries

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

Diversification Opportunities for Tenaris SA and Flotek Industries

0.85

Correlation Coefficient

Tenaris SA  Flotek Industries

Very poor diversification

The 3 months correlation between Tenaris and Flotek is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and Flotek Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flotek 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 Flotek Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flotek Industries has no effect on the direction of Tenaris SA i.e., Tenaris SA and Flotek Industries go up and down completely randomly.

Pair Corralation between Tenaris SA and Flotek Industries

Allowing for the 90-day total investment horizon Tenaris SA ADR is expected to generate 0.51 times more return on investment than Flotek Industries. However, Tenaris SA ADR is 1.97 times less risky than Flotek Industries. It trades about -0.09 of its potential returns per unit of risk. Flotek Industries is currently generating about -0.07 per unit of risk. If you would invest  3,921  in Tenaris SA ADR on January 18, 2025 and sell it today you would lose (595.00) from holding Tenaris SA ADR or give up 15.17% of portfolio value over 90 days.

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

Tenaris SA ADR  vs.  Flotek Industries

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 inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Flotek Industries

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Tenaris SA and Flotek Industries

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

The idea behind Tenaris SA ADR and Flotek 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.