Correlation Between Energy Transfer and Tomra Systems

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

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

Diversification Opportunities for Energy Transfer and Tomra Systems

-0.65

Correlation Coefficient

Energy Transfer  Tomra Systems

Excellent diversification

The 3 months correlation between Energy and Tomra is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP 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 Energy Transfer 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 Energy Transfer LP 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 Energy Transfer i.e., Energy Transfer and Tomra Systems go up and down completely randomly.

Pair Corralation between Energy Transfer and Tomra Systems

Allowing for the 90-day total investment horizon Energy Transfer LP is expected to generate 0.25 times more return on investment than Tomra Systems. However, Energy Transfer LP is 4.04 times less risky than Tomra Systems. It trades about 0.15 of its potential returns per unit of risk. Tomra Systems ASA is currently generating about 0.03 per unit of risk. If you would invest  1,172  in Energy Transfer LP on September 12, 2024 and sell it today you would earn a total of  755.00  from holding Energy Transfer LP or generate 64.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	76.74%
Values	Daily Returns

Energy Transfer LP  vs.  Tomra Systems ASA

Energy Transfer LP

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Energy Transfer unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tomra Systems ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tomra Systems ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Energy Transfer and Tomra Systems

The main advantage of trading using opposite Energy Transfer and Tomra Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Transfer 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 Energy Transfer LP 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..