Correlation Between Stericycle and Tomra Systems

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

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

Diversification Opportunities for Stericycle and Tomra Systems

-0.48

Correlation Coefficient

Stericycle  Tomra Systems

Very good diversification

The 3 months correlation between Stericycle and Tomra is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Stericycle 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 Stericycle 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 Stericycle 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 Stericycle i.e., Stericycle and Tomra Systems go up and down completely randomly.

Pair Corralation between Stericycle and Tomra Systems

Given the investment horizon of 90 days Stericycle is expected to generate 1.52 times more return on investment than Tomra Systems. However, Stericycle is 1.52 times more volatile than Tomra Systems ASA. It trades about 0.16 of its potential returns per unit of risk. Tomra Systems ASA is currently generating about -0.01 per unit of risk. If you would invest  5,890  in Stericycle on September 5, 2024 and sell it today you would earn a total of  1,960  from holding Stericycle or generate 33.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	77.78%
Values	Daily Returns

Stericycle  vs.  Tomra Systems ASA

Stericycle

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Stericycle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite inconsistent fundamental indicators, Stericycle disclosed 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. In spite of fairly strong basic indicators, Tomra Systems is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stericycle and Tomra Systems

The main advantage of trading using opposite Stericycle and Tomra Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stericycle 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 Stericycle 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.