Correlation Between Nel ASA and Tomra Systems

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

Diversification Opportunities for Nel ASA and Tomra Systems

-0.23

Correlation Coefficient

Nel ASA  Tomra Systems

Very good diversification

The 3 months correlation between Nel and Tomra is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nel 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 Nel 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 Nel 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 Nel ASA i.e., Nel ASA and Tomra Systems go up and down completely randomly.

Pair Corralation between Nel ASA and Tomra Systems

Assuming the 90 days trading horizon Nel ASA is expected to generate 3.27 times more return on investment than Tomra Systems. However, Nel ASA is 3.27 times more volatile than Tomra Systems ASA. It trades about 0.02 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  270.00  in Nel ASA on December 29, 2024 and sell it today you would lose (27.00) from holding Nel ASA or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Nel ASA  vs.  Tomra Systems ASA

Nel ASA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nel ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Nel ASA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Nel ASA and Tomra Systems

The main advantage of trading using opposite Nel ASA and Tomra Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nel 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 Nel 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.