Correlation Between Tomra Systems and Critic Clothing

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

Diversification Opportunities for Tomra Systems and Critic Clothing

-0.23

Correlation Coefficient

Tomra Systems  Critic Clothing

Very good diversification

The 3 months correlation between Tomra and Critic is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Tomra Systems ASA and Critic Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Critic Clothing 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 Critic Clothing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Critic Clothing has no effect on the direction of Tomra Systems i.e., Tomra Systems and Critic Clothing go up and down completely randomly.

Pair Corralation between Tomra Systems and Critic Clothing

Assuming the 90 days horizon Tomra Systems ASA is expected to under-perform the Critic Clothing. But the pink sheet apears to be less risky and, when comparing its historical volatility, Tomra Systems ASA is 10.71 times less risky than Critic Clothing. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Critic Clothing is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2.73  in Critic Clothing on September 13, 2024 and sell it today you would lose (0.73) from holding Critic Clothing or give up 26.74% 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.  Critic Clothing

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 latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Critic Clothing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Critic Clothing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Critic Clothing reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tomra Systems and Critic Clothing

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

The idea behind Tomra Systems ASA and Critic Clothing 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.