Correlation Between GN Store and First Farms

Can any of the company-specific risk be diversified away by investing in both GN Store and First Farms 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 GN Store and First Farms into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GN Store Nord and First Farms AS, you can compare the effects of market volatilities on GN Store and First Farms 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 GN Store with a short position of First Farms. Check out your portfolio center. Please also check ongoing floating volatility patterns of GN Store and First Farms.

Diversification Opportunities for GN Store and First Farms

-0.33

Correlation Coefficient

GN Store  First Farms

Very good diversification

The 3 months correlation between GN Store and First is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding GN Store Nord and First Farms AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Farms AS and GN Store 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 GN Store Nord are associated (or correlated) with First Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Farms AS has no effect on the direction of GN Store i.e., GN Store and First Farms go up and down completely randomly.

Pair Corralation between GN Store and First Farms

Assuming the 90 days horizon GN Store Nord is expected to under-perform the First Farms. In addition to that, GN Store is 1.39 times more volatile than First Farms AS. It trades about -0.07 of its total potential returns per unit of risk. First Farms AS is currently generating about 0.14 per unit of volatility. If you would invest  7,040  in First Farms AS on December 24, 2024 and sell it today you would earn a total of  1,320  from holding First Farms AS or generate 18.75% return on investment over 90 days.

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

GN Store Nord  vs.  First Farms AS

GN Store Nord

Risk-Adjusted Performance

Very Weak

Over the last 90 days GN Store Nord has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

First Farms AS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Farms AS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, First Farms sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GN Store and First Farms

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

The idea behind GN Store Nord and First Farms AS 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.