Correlation Between Borgestad and Tomra Systems

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

By analyzing existing cross correlation between Borgestad A and Tomra Systems ASA, you can compare the effects of market volatilities on Borgestad 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 Borgestad with a short position of Tomra Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Borgestad and Tomra Systems.

Diversification Opportunities for Borgestad and Tomra Systems

0.05

Correlation Coefficient

Borgestad  Tomra Systems

Significant diversification

The 3 months correlation between Borgestad and Tomra is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Borgestad A 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 Borgestad 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 Borgestad A 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 Borgestad i.e., Borgestad and Tomra Systems go up and down completely randomly.

Pair Corralation between Borgestad and Tomra Systems

Assuming the 90 days trading horizon Borgestad A is expected to under-perform the Tomra Systems. But the stock apears to be less risky and, when comparing its historical volatility, Borgestad A is 1.26 times less risky than Tomra Systems. The stock trades about -0.08 of its potential returns per unit of risk. The Tomra Systems ASA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  15,030  in Tomra Systems ASA on December 31, 2024 and sell it today you would earn a total of  300.00  from holding Tomra Systems ASA or generate 2.0% return on investment over 90 days.

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

Borgestad A  vs.  Tomra Systems ASA

Borgestad A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Borgestad A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Tomra Systems ASA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tomra Systems ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent primary indicators, Tomra Systems is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Borgestad and Tomra Systems

The main advantage of trading using opposite Borgestad and Tomra Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Borgestad 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 Borgestad A 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.