Correlation Between Tenaris SA and US Silica

Can any of the company-specific risk be diversified away by investing in both Tenaris SA and US Silica 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 US Silica 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 US Silica Holdings, you can compare the effects of market volatilities on Tenaris SA and US Silica 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 US Silica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tenaris SA and US Silica.

Diversification Opportunities for Tenaris SA and US Silica

0.0

Correlation Coefficient

Tenaris SA  US Silica

Pay attention - limited upside

The 3 months correlation between Tenaris and SLCA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Tenaris SA ADR and US Silica Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Silica Holdings 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 US Silica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Silica Holdings has no effect on the direction of Tenaris SA i.e., Tenaris SA and US Silica go up and down completely randomly.

Pair Corralation between Tenaris SA and US Silica

Allowing for the 90-day total investment horizon Tenaris SA ADR is expected to under-perform the US Silica. But the stock apears to be less risky and, when comparing its historical volatility, Tenaris SA ADR is 2.29 times less risky than US Silica. The stock trades about -0.18 of its potential returns per unit of risk. The US Silica Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,306  in US Silica Holdings on February 15, 2024 and sell it today you would earn a total of  247.00  from holding US Silica Holdings or generate 18.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tenaris SA ADR  vs.  US Silica Holdings

Tenaris SA ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tenaris SA ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Tenaris SA may actually be approaching a critical reversion point that can send shares even higher in June 2024.

US Silica Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Silica Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, US Silica sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tenaris SA and US Silica

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

The idea behind Tenaris SA ADR and US Silica Holdings 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.