Correlation Between Tomra Systems and Nel ASA

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

Diversification Opportunities for Tomra Systems and Nel ASA

-0.26

Correlation Coefficient

Tomra Systems  Nel ASA

Very good diversification

The 3 months correlation between Tomra and Nel is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Tomra Systems ASA and Nel ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nel 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 Nel ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nel ASA has no effect on the direction of Tomra Systems i.e., Tomra Systems and Nel ASA go up and down completely randomly.

Pair Corralation between Tomra Systems and Nel ASA

Assuming the 90 days trading horizon Tomra Systems is expected to generate 1.54 times less return on investment than Nel ASA. But when comparing it to its historical volatility, Tomra Systems ASA is 3.27 times less risky than Nel ASA. It trades about 0.04 of its potential returns per unit of risk. Nel ASA is currently generating about 0.02 of returns per unit of risk over similar time horizon. 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

Tomra Systems ASA  vs.  Nel 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.

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.

Pair Trading with Tomra Systems and Nel ASA

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

The idea behind Tomra Systems ASA and Nel 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.