Correlation Between Tenaris SA and Seadrill

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

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

Diversification Opportunities for Tenaris SA and Seadrill

0.2

Correlation Coefficient

Tenaris SA  Seadrill

Modest diversification

The 3 months correlation between Tenaris and Seadrill is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited 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 ADR are associated (or correlated) with Seadrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seadrill Limited has no effect on the direction of Tenaris SA i.e., Tenaris SA and Seadrill go up and down completely randomly.

Pair Corralation between Tenaris SA and Seadrill

Allowing for the 90-day total investment horizon Tenaris SA ADR is expected to generate 0.72 times more return on investment than Seadrill. However, Tenaris SA ADR is 1.4 times less risky than Seadrill. It trades about 0.11 of its potential returns per unit of risk. Seadrill Limited is currently generating about -0.09 per unit of risk. If you would invest  3,030  in Tenaris SA ADR on September 29, 2024 and sell it today you would earn a total of  740.00  from holding Tenaris SA ADR or generate 24.42% return on investment over 90 days.

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

Tenaris SA ADR  vs.  Seadrill Limited

Tenaris SA ADR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 14 (%) 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.

Seadrill Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seadrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Tenaris SA and Seadrill

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

The idea behind Tenaris SA ADR and Seadrill Limited 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.