Correlation Between Waste Plastic and Tomra Systems

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

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

Diversification Opportunities for Waste Plastic and Tomra Systems

0.19

Correlation Coefficient

Waste Plastic  Tomra Systems

Average diversification

The 3 months correlation between Waste and Tomra is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Waste Plastic Upcycling 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 Waste Plastic 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 Waste Plastic Upcycling 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 Waste Plastic i.e., Waste Plastic and Tomra Systems go up and down completely randomly.

Pair Corralation between Waste Plastic and Tomra Systems

Assuming the 90 days trading horizon Waste Plastic Upcycling is expected to under-perform the Tomra Systems. In addition to that, Waste Plastic is 1.73 times more volatile than Tomra Systems ASA. It trades about -0.17 of its total potential returns per unit of risk. Tomra Systems ASA is currently generating about 0.02 per unit of volatility. If you would invest  15,100  in Tomra Systems ASA on September 5, 2024 and sell it today you would earn a total of  150.00  from holding Tomra Systems ASA or generate 0.99% return on investment over 90 days.

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

Waste Plastic Upcycling  vs.  Tomra Systems ASA

Waste Plastic Upcycling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waste Plastic Upcycling 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Tomra Systems ASA

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tomra Systems ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent primary indicators, Tomra Systems is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Waste Plastic and Tomra Systems

The main advantage of trading using opposite Waste Plastic and Tomra Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Plastic 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 Waste Plastic Upcycling 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.