Correlation Between Tomra Systems and Halma Plc

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

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

Diversification Opportunities for Tomra Systems and Halma Plc

0.5

Correlation Coefficient

Tomra Systems  Halma Plc

Very weak diversification

The 3 months correlation between Tomra and Halma is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tomra Systems ASA and Halma plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halma plc and Tomra Systems 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 Tomra Systems ASA are associated (or correlated) with Halma Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halma plc has no effect on the direction of Tomra Systems i.e., Tomra Systems and Halma Plc go up and down completely randomly.

Pair Corralation between Tomra Systems and Halma Plc

Assuming the 90 days horizon Tomra Systems ASA is expected to under-perform the Halma Plc. In addition to that, Tomra Systems is 1.37 times more volatile than Halma plc. It trades about -0.02 of its total potential returns per unit of risk. Halma plc is currently generating about 0.04 per unit of volatility. If you would invest  3,318  in Halma plc on September 12, 2024 and sell it today you would earn a total of  143.00  from holding Halma plc or generate 4.31% return on investment over 90 days.

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

Tomra Systems ASA  vs.  Halma plc

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.

Halma plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Halma plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Halma Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tomra Systems and Halma Plc

The main advantage of trading using opposite Tomra Systems and Halma Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tomra Systems position performs unexpectedly, Halma Plc 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 Halma Plc will offset losses from the drop in Halma Plc's long position.

The idea behind Tomra Systems ASA and Halma plc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.