Correlation Between SMG Industries and Tenaris SA

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

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

Diversification Opportunities for SMG Industries and Tenaris SA

-0.68

Correlation Coefficient

SMG Industries  Tenaris SA

Excellent diversification

The 3 months correlation between SMG and Tenaris is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding SMG Industries and Tenaris SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaris SA and SMG Industries 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 SMG Industries 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 SMG Industries i.e., SMG Industries and Tenaris SA go up and down completely randomly.

Pair Corralation between SMG Industries and Tenaris SA

Given the investment horizon of 90 days SMG Industries is expected to under-perform the Tenaris SA. In addition to that, SMG Industries is 5.53 times more volatile than Tenaris SA. It trades about -0.12 of its total potential returns per unit of risk. Tenaris SA is currently generating about 0.25 per unit of volatility. If you would invest  1,391  in Tenaris SA on September 17, 2024 and sell it today you would earn a total of  485.00  from holding Tenaris SA or generate 34.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

SMG Industries  vs.  Tenaris SA

SMG Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMG 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Tenaris SA

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Tenaris SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SMG Industries and Tenaris SA

The main advantage of trading using opposite SMG Industries and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMG Industries 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 SMG Industries 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.