Correlation Between Tenaris SA and Geospace Technologies

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

Diversification Opportunities for Tenaris SA and Geospace Technologies

0.67

Correlation Coefficient

Tenaris SA  Geospace Technologies

Poor diversification

The 3 months correlation between Tenaris and Geospace is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and Geospace Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geospace Technologies 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 Geospace Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geospace Technologies has no effect on the direction of Tenaris SA i.e., Tenaris SA and Geospace Technologies go up and down completely randomly.

Pair Corralation between Tenaris SA and Geospace Technologies

Allowing for the 90-day total investment horizon Tenaris SA is expected to generate 2.1 times less return on investment than Geospace Technologies. But when comparing it to its historical volatility, Tenaris SA ADR is 1.69 times less risky than Geospace Technologies. It trades about 0.14 of its potential returns per unit of risk. Geospace Technologies is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  908.00  in Geospace Technologies on August 1, 2024 and sell it today you would earn a total of  252.00  from holding Geospace Technologies or generate 27.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Tenaris SA ADR  vs.  Geospace Technologies

Tenaris SA ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Tenaris SA may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Geospace Technologies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Geospace Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Geospace Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tenaris SA and Geospace Technologies

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

The idea behind Tenaris SA ADR and Geospace Technologies 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.