Correlation Between Tomra Systems and Electromagnetic Geoservices

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

Diversification Opportunities for Tomra Systems and Electromagnetic Geoservices

-0.66

Correlation Coefficient

Tomra Systems  Electromagnetic Geoservices

Excellent diversification

The 3 months correlation between Tomra and Electromagnetic is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Tomra Systems ASA and Electromagnetic Geoservices AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromagnetic Geoservices 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 Electromagnetic Geoservices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromagnetic Geoservices has no effect on the direction of Tomra Systems i.e., Tomra Systems and Electromagnetic Geoservices go up and down completely randomly.

Pair Corralation between Tomra Systems and Electromagnetic Geoservices

Assuming the 90 days trading horizon Tomra Systems ASA is expected to under-perform the Electromagnetic Geoservices. But the stock apears to be less risky and, when comparing its historical volatility, Tomra Systems ASA is 1.11 times less risky than Electromagnetic Geoservices. The stock trades about -0.01 of its potential returns per unit of risk. The Electromagnetic Geoservices ASA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  272.00  in Electromagnetic Geoservices ASA on February 24, 2024 and sell it today you would lose (53.00) from holding Electromagnetic Geoservices ASA or give up 19.49% of portfolio value over 90 days.

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

Tomra Systems ASA  vs.  Electromagnetic Geoservices AS

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. 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.

Electromagnetic Geoservices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electromagnetic Geoservices ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Tomra Systems and Electromagnetic Geoservices

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

The idea behind Tomra Systems ASA and Electromagnetic Geoservices 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.