Correlation Between Gjensidige Forsikring and Idex ASA

Can any of the company-specific risk be diversified away by investing in both Gjensidige Forsikring and Idex 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 Gjensidige Forsikring and Idex ASA 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 Idex ASA, you can compare the effects of market volatilities on Gjensidige Forsikring and Idex 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 Gjensidige Forsikring with a short position of Idex ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gjensidige Forsikring and Idex ASA.

Diversification Opportunities for Gjensidige Forsikring and Idex ASA

-0.77

Correlation Coefficient

Gjensidige Forsikring  Idex ASA

Pay attention - limited upside

The 3 months correlation between Gjensidige and Idex is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Gjensidige Forsikring ASA and Idex ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idex 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 Idex ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idex ASA has no effect on the direction of Gjensidige Forsikring i.e., Gjensidige Forsikring and Idex ASA go up and down completely randomly.

Pair Corralation between Gjensidige Forsikring and Idex ASA

Assuming the 90 days trading horizon Gjensidige Forsikring ASA is expected to generate 0.09 times more return on investment than Idex ASA. However, Gjensidige Forsikring ASA is 10.67 times less risky than Idex ASA. It trades about 0.25 of its potential returns per unit of risk. Idex ASA is currently generating about -0.01 per unit of risk. If you would invest  19,359  in Gjensidige Forsikring ASA on December 28, 2024 and sell it today you would earn a total of  4,761  from holding Gjensidige Forsikring ASA or generate 24.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Gjensidige Forsikring ASA  vs.  Idex 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 19 (%) 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.

Idex ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Idex ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential 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 Gjensidige Forsikring and Idex ASA

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

The idea behind Gjensidige Forsikring ASA and Idex 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.