Correlation Between Casella Waste and Tomra Systems

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

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

Diversification Opportunities for Casella Waste and Tomra Systems

0.54

Correlation Coefficient

Casella Waste  Tomra Systems

Very weak diversification

The 3 months correlation between Casella and Tomra is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Casella Waste Systems 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 Casella Waste 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 Casella Waste Systems 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 Casella Waste i.e., Casella Waste and Tomra Systems go up and down completely randomly.

Pair Corralation between Casella Waste and Tomra Systems

Given the investment horizon of 90 days Casella Waste is expected to generate 3.06 times less return on investment than Tomra Systems. But when comparing it to its historical volatility, Casella Waste Systems is 1.73 times less risky than Tomra Systems. It trades about 0.06 of its potential returns per unit of risk. Tomra Systems ASA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,286  in Tomra Systems ASA on December 28, 2024 and sell it today you would earn a total of  208.00  from holding Tomra Systems ASA or generate 16.17% return on investment over 90 days.

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

Casella Waste Systems  vs.  Tomra Systems ASA

Casella Waste Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Casella Waste Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Casella Waste is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Tomra Systems ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tomra Systems ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Tomra Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Casella Waste and Tomra Systems

The main advantage of trading using opposite Casella Waste and Tomra Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Casella Waste 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 Casella Waste Systems 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.