Correlation Between BRP and Tenaris SA

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

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

Diversification Opportunities for BRP and Tenaris SA

-0.82

Correlation Coefficient

BRP  Tenaris SA

Pay attention - limited upside

The 3 months correlation between BRP and Tenaris is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc 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 BRP 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 BRP Inc 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 BRP i.e., BRP and Tenaris SA go up and down completely randomly.

Pair Corralation between BRP and Tenaris SA

Given the investment horizon of 90 days BRP Inc is expected to under-perform the Tenaris SA. In addition to that, BRP is 1.3 times more volatile than Tenaris SA ADR. It trades about -0.11 of its total potential returns per unit of risk. Tenaris SA ADR is currently generating about 0.32 per unit of volatility. If you would invest  2,792  in Tenaris SA ADR on September 12, 2024 and sell it today you would earn a total of  1,116  from holding Tenaris SA ADR or generate 39.97% return on investment over 90 days.

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

BRP Inc  vs.  Tenaris SA ADR

BRP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Tenaris SA ADR

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 25 (%) 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 BRP and Tenaris SA

The main advantage of trading using opposite BRP and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP 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 BRP Inc 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 Stocks Directory module to find actively traded stocks across global markets.