Correlation Between Kitron ASA and Tomra Systems

Can any of the company-specific risk be diversified away by investing in both Kitron 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 Kitron 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 Kitron ASA and Tomra Systems ASA, you can compare the effects of market volatilities on Kitron 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 Kitron ASA with a short position of Tomra Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kitron ASA and Tomra Systems.

Diversification Opportunities for Kitron ASA and Tomra Systems

0.25

Correlation Coefficient

Kitron ASA  Tomra Systems

Modest diversification

The 3 months correlation between Kitron and Tomra is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Kitron 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 Kitron 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 Kitron 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 Kitron ASA i.e., Kitron ASA and Tomra Systems go up and down completely randomly.

Pair Corralation between Kitron ASA and Tomra Systems

Assuming the 90 days trading horizon Kitron ASA is expected to generate 0.94 times more return on investment than Tomra Systems. However, Kitron ASA is 1.06 times less risky than Tomra Systems. It trades about 0.18 of its potential returns per unit of risk. Tomra Systems ASA is currently generating about 0.04 per unit of risk. If you would invest  3,382  in Kitron ASA on December 30, 2024 and sell it today you would earn a total of  1,042  from holding Kitron ASA or generate 30.81% return on investment over 90 days.

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

Kitron ASA  vs.  Tomra Systems ASA

Kitron ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kitron ASA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Kitron ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Tomra Systems ASA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tomra Systems ASA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting primary indicators, Tomra Systems may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kitron ASA and Tomra Systems

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

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.