Correlation Between Tenaris SA and Schlumberger

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

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

Diversification Opportunities for Tenaris SA and Schlumberger

0.77

Correlation Coefficient

Tenaris SA  Schlumberger

Poor diversification

The 3 months correlation between Tenaris and Schlumberger is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA and Schlumberger NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger NV 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 Schlumberger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schlumberger NV has no effect on the direction of Tenaris SA i.e., Tenaris SA and Schlumberger go up and down completely randomly.

Pair Corralation between Tenaris SA and Schlumberger

Assuming the 90 days horizon Tenaris SA is expected to generate 0.85 times more return on investment than Schlumberger. However, Tenaris SA is 1.18 times less risky than Schlumberger. It trades about -0.38 of its potential returns per unit of risk. Schlumberger NV is currently generating about -0.44 per unit of risk. If you would invest  1,997  in Tenaris SA on January 27, 2024 and sell it today you would lose (146.00) from holding Tenaris SA or give up 7.31% of portfolio value over 90 days.

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

Tenaris SA  vs.  Schlumberger NV

Tenaris SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA are ranked lower than 8 (%) 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.

Schlumberger NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schlumberger NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Schlumberger is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tenaris SA and Schlumberger

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

The idea behind Tenaris SA and Schlumberger NV 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.