Correlation Between Tomra Systems and Elkem ASA
Can any of the company-specific risk be diversified away by investing in both Tomra Systems and Elkem ASA 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 Tomra Systems and Elkem ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tomra Systems ASA and Elkem ASA, you can compare the effects of market volatilities on Tomra Systems and Elkem ASA 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 Tomra Systems with a short position of Elkem ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tomra Systems and Elkem ASA.
Diversification Opportunities for Tomra Systems and Elkem ASA
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tomra and Elkem is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Tomra Systems ASA and Elkem ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elkem ASA and Tomra Systems 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 Tomra Systems ASA are associated (or correlated) with Elkem ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elkem ASA has no effect on the direction of Tomra Systems i.e., Tomra Systems and Elkem ASA go up and down completely randomly.
Pair Corralation between Tomra Systems and Elkem ASA
Assuming the 90 days trading horizon Tomra Systems ASA is expected to generate 1.45 times more return on investment than Elkem ASA. However, Tomra Systems is 1.45 times more volatile than Elkem ASA. It trades about 0.01 of its potential returns per unit of risk. Elkem ASA is currently generating about -0.03 per unit of risk. If you would invest 16,589 in Tomra Systems ASA on September 1, 2024 and sell it today you would lose (1,029) from holding Tomra Systems ASA or give up 6.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tomra Systems ASA vs. Elkem ASA
Performance |
| Timeline |
| Tomra Systems ASA |
| Elkem ASA |
Tomra Systems and Elkem ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tomra Systems and Elkem ASA
The main advantage of trading using opposite Tomra Systems and Elkem ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tomra Systems position performs unexpectedly, Elkem ASA 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 Elkem ASA will offset losses from the drop in Elkem ASA's long position.| Tomra Systems vs. Orkla ASA | Tomra Systems vs. Telenor ASA | Tomra Systems vs. Yara International ASA | Tomra Systems vs. SalMar ASA |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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