Correlation Between Tenaris SA and Halliburton

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

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

Diversification Opportunities for Tenaris SA and Halliburton

0.83

Correlation Coefficient

Tenaris SA  Halliburton

Very poor diversification

The 3 months correlation between Tenaris and Halliburton is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton 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 Halliburton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halliburton has no effect on the direction of Tenaris SA i.e., Tenaris SA and Halliburton go up and down completely randomly.

Pair Corralation between Tenaris SA and Halliburton

Assuming the 90 days horizon Tenaris SA is expected to generate 1.06 times more return on investment than Halliburton. However, Tenaris SA is 1.06 times more volatile than Halliburton. It trades about 0.04 of its potential returns per unit of risk. Halliburton is currently generating about 0.02 per unit of risk. If you would invest  1,509  in Tenaris SA on January 20, 2024 and sell it today you would earn a total of  379.00  from holding Tenaris SA or generate 25.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	75.15%
Values	Daily Returns

Tenaris SA  vs.  Halliburton

Tenaris SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA are ranked lower than 9 (%) 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.

Halliburton

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Halliburton are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Halliburton disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tenaris SA and Halliburton

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

The idea behind Tenaris SA and Halliburton 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.