Correlation Between Delek Drilling and Tenaris SA

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

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

Diversification Opportunities for Delek Drilling and Tenaris SA

0.81

Correlation Coefficient

Delek Drilling  Tenaris SA

Very poor diversification

The 3 months correlation between Delek and Tenaris is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling 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 Delek Drilling 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 Delek Drilling 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 Delek Drilling i.e., Delek Drilling and Tenaris SA go up and down completely randomly.

Pair Corralation between Delek Drilling and Tenaris SA

Assuming the 90 days horizon Delek Drilling is expected to generate 3.03 times less return on investment than Tenaris SA. But when comparing it to its historical volatility, Delek Drilling is 1.39 times less risky than Tenaris SA. It trades about 0.18 of its potential returns per unit of risk. Tenaris SA ADR is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  3,255  in Tenaris SA ADR on September 4, 2024 and sell it today you would earn a total of  593.00  from holding Tenaris SA ADR or generate 18.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.48%
Values	Daily Returns

Delek Drilling   vs.  Tenaris SA ADR

Delek Drilling

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Delek Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Tenaris SA ADR

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 24 (%) 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 Delek Drilling and Tenaris SA

The main advantage of trading using opposite Delek Drilling and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delek Drilling 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 Delek Drilling 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.