Correlation Between Halliburton and Tenaris SA

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

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

Diversification Opportunities for Halliburton and Tenaris SA

0.6

Correlation Coefficient

Halliburton  Tenaris SA

Poor diversification

The 3 months correlation between Halliburton and Tenaris is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Halliburton and Tenaris SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaris SA and Halliburton 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 Halliburton 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 has no effect on the direction of Halliburton i.e., Halliburton and Tenaris SA go up and down completely randomly.

Pair Corralation between Halliburton and Tenaris SA

Assuming the 90 days horizon Halliburton is expected to under-perform the Tenaris SA. In addition to that, Halliburton is 1.37 times more volatile than Tenaris SA. It trades about -0.02 of its total potential returns per unit of risk. Tenaris SA is currently generating about 0.26 per unit of volatility. If you would invest  2,600  in Tenaris SA on September 23, 2024 and sell it today you would earn a total of  900.00  from holding Tenaris SA or generate 34.62% return on investment over 90 days.

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

Halliburton  vs.  Tenaris SA

Halliburton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Halliburton is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Tenaris SA

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tenaris SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Halliburton and Tenaris SA

The main advantage of trading using opposite Halliburton and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Halliburton 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 Halliburton and Tenaris SA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.