Correlation Between XXL ASA and Tomra Systems
Can any of the company-specific risk be diversified away by investing in both XXL ASA 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 XXL ASA and Tomra Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XXL ASA and Tomra Systems ASA, you can compare the effects of market volatilities on XXL ASA 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 XXL ASA with a short position of Tomra Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of XXL ASA and Tomra Systems.
Diversification Opportunities for XXL ASA and Tomra Systems
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between XXL and Tomra is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding XXL ASA 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 XXL ASA 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 XXL ASA 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 XXL ASA i.e., XXL ASA and Tomra Systems go up and down completely randomly.
Pair Corralation between XXL ASA and Tomra Systems
Assuming the 90 days trading horizon XXL ASA is expected to under-perform the Tomra Systems. In addition to that, XXL ASA is 2.03 times more volatile than Tomra Systems ASA. It trades about -0.06 of its total potential returns per unit of risk. Tomra Systems ASA is currently generating about 0.01 per unit of volatility. 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 Together |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
XXL ASA vs. Tomra Systems ASA
Performance |
| Timeline |
| XXL ASA |
| Tomra Systems ASA |
XXL ASA and Tomra Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XXL ASA and Tomra Systems
The main advantage of trading using opposite XXL ASA and Tomra Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XXL ASA 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 XXL ASA 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. Orkla ASA | Tomra Systems vs. Telenor ASA | Tomra Systems vs. Yara International ASA | Tomra Systems vs. SalMar ASA |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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