Correlation Between Gjensidige Forsikring and AF Gruppen

Can any of the company-specific risk be diversified away by investing in both Gjensidige Forsikring and AF Gruppen 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 Gjensidige Forsikring and AF Gruppen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gjensidige Forsikring ASA and AF Gruppen ASA, you can compare the effects of market volatilities on Gjensidige Forsikring and AF Gruppen 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 Gjensidige Forsikring with a short position of AF Gruppen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gjensidige Forsikring and AF Gruppen.

Diversification Opportunities for Gjensidige Forsikring and AF Gruppen

0.02

Correlation Coefficient

Gjensidige Forsikring  AF Gruppen

Significant diversification

The 3 months correlation between Gjensidige and AFG is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Gjensidige Forsikring ASA and AF Gruppen ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AF Gruppen ASA and Gjensidige Forsikring 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 Gjensidige Forsikring ASA are associated (or correlated) with AF Gruppen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AF Gruppen ASA has no effect on the direction of Gjensidige Forsikring i.e., Gjensidige Forsikring and AF Gruppen go up and down completely randomly.

Pair Corralation between Gjensidige Forsikring and AF Gruppen

Assuming the 90 days trading horizon Gjensidige Forsikring ASA is expected to generate 0.86 times more return on investment than AF Gruppen. However, Gjensidige Forsikring ASA is 1.16 times less risky than AF Gruppen. It trades about 0.23 of its potential returns per unit of risk. AF Gruppen ASA is currently generating about -0.04 per unit of risk. If you would invest  19,359  in Gjensidige Forsikring ASA on December 30, 2024 and sell it today you would earn a total of  4,601  from holding Gjensidige Forsikring ASA or generate 23.77% return on investment over 90 days.

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

Gjensidige Forsikring ASA  vs.  AF Gruppen ASA

Gjensidige Forsikring ASA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gjensidige Forsikring ASA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Gjensidige Forsikring disclosed solid returns over the last few months and may actually be approaching a breakup point.

AF Gruppen ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days AF Gruppen ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, AF Gruppen 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 Gjensidige Forsikring and AF Gruppen

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

The idea behind Gjensidige Forsikring ASA and AF Gruppen 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.