Correlation Between Tenaris SA and Tristar Acquisition

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

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

Diversification Opportunities for Tenaris SA and Tristar Acquisition

-0.33

Correlation Coefficient

Tenaris SA  Tristar Acquisition

Very good diversification

The 3 months correlation between Tenaris and Tristar is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA and Tristar Acquisition Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tristar Acquisition 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 are associated (or correlated) with Tristar Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tristar Acquisition has no effect on the direction of Tenaris SA i.e., Tenaris SA and Tristar Acquisition go up and down completely randomly.

Pair Corralation between Tenaris SA and Tristar Acquisition

Assuming the 90 days horizon Tenaris SA is expected to generate 0.27 times more return on investment than Tristar Acquisition. However, Tenaris SA is 3.75 times less risky than Tristar Acquisition. It trades about 0.24 of its potential returns per unit of risk. Tristar Acquisition Group is currently generating about 0.03 per unit of risk. If you would invest  1,391  in Tenaris SA on September 16, 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	Insignificant
Accuracy	98.46%
Values	Daily Returns

Tenaris SA  vs.  Tristar Acquisition Group

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 uncertain basic indicators, Tenaris SA reported solid returns over the last few months and may actually be approaching a breakup point.

Tristar Acquisition

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tristar Acquisition Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, Tristar Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tenaris SA and Tristar Acquisition

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

The idea behind Tenaris SA and Tristar Acquisition Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.