Correlation Between Tomra Systems and Hexagon Composites

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

Diversification Opportunities for Tomra Systems and Hexagon Composites

-0.46

Correlation Coefficient

Tomra Systems  Hexagon Composites

Very good diversification

The 3 months correlation between Tomra and Hexagon is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Tomra Systems ASA and Hexagon Composites ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexagon Composites ASA 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 Hexagon Composites. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexagon Composites ASA has no effect on the direction of Tomra Systems i.e., Tomra Systems and Hexagon Composites go up and down completely randomly.

Pair Corralation between Tomra Systems and Hexagon Composites

Assuming the 90 days trading horizon Tomra Systems ASA is expected to generate 0.78 times more return on investment than Hexagon Composites. However, Tomra Systems ASA is 1.29 times less risky than Hexagon Composites. It trades about 0.04 of its potential returns per unit of risk. Hexagon Composites ASA is currently generating about -0.34 per unit of risk. If you would invest  14,660  in Tomra Systems ASA on December 30, 2024 and sell it today you would earn a total of  670.00  from holding Tomra Systems ASA or generate 4.57% return on investment over 90 days.

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

Tomra Systems ASA  vs.  Hexagon Composites ASA

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.

Hexagon Composites ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hexagon Composites ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Tomra Systems and Hexagon Composites

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

The idea behind Tomra Systems ASA and Hexagon Composites 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.