Correlation Between GM and Tomra Systems
Can any of the company-specific risk be diversified away by investing in both GM and Tomra Systems 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 GM and Tomra Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Tomra Systems ASA, you can compare the effects of market volatilities on GM and Tomra Systems 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 GM with a short position of Tomra Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Tomra Systems.
Diversification Opportunities for GM and Tomra Systems
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and Tomra is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Tomra Systems ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tomra Systems ASA and GM 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 General Motors are associated (or correlated) with Tomra Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tomra Systems ASA has no effect on the direction of GM i.e., GM and Tomra Systems go up and down completely randomly.
Pair Corralation between GM and Tomra Systems
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.62 times more return on investment than Tomra Systems. However, General Motors is 1.61 times less risky than Tomra Systems. It trades about 0.05 of its potential returns per unit of risk. Tomra Systems ASA is currently generating about 0.0 per unit of risk. If you would invest 3,749 in General Motors on August 29, 2024 and sell it today you would earn a total of 1,730 from holding General Motors or generate 46.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 94.56% |
| Values | Daily Returns |
General Motors vs. Tomra Systems ASA
Performance |
| Timeline |
| General Motors |
| Tomra Systems ASA |
GM and Tomra Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Tomra Systems
The main advantage of trading using opposite GM and Tomra Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Tomra Systems 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 Tomra Systems will offset losses from the drop in Tomra Systems' long position.The idea behind General Motors and Tomra Systems ASA 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.| Tomra Systems vs. Waste Connections | Tomra Systems vs. Clean Harbors | Tomra Systems vs. Casella Waste Systems | Tomra Systems vs. Waste Management |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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