Correlation Between Microsoft and Gjensidige Forsikring

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

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

Diversification Opportunities for Microsoft and Gjensidige Forsikring

0.24

Correlation Coefficient

Microsoft  Gjensidige Forsikring

Modest diversification

The 3 months correlation between Microsoft and Gjensidige is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Gjensidige Forsikring ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gjensidige Forsikring ASA and Microsoft 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 Microsoft are associated (or correlated) with Gjensidige Forsikring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gjensidige Forsikring ASA has no effect on the direction of Microsoft i.e., Microsoft and Gjensidige Forsikring go up and down completely randomly.

Pair Corralation between Microsoft and Gjensidige Forsikring

Given the investment horizon of 90 days Microsoft is expected to generate 2.23 times less return on investment than Gjensidige Forsikring. But when comparing it to its historical volatility, Microsoft is 1.32 times less risky than Gjensidige Forsikring. It trades about 0.07 of its potential returns per unit of risk. Gjensidige Forsikring ASA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,540  in Gjensidige Forsikring ASA on September 5, 2024 and sell it today you would earn a total of  212.00  from holding Gjensidige Forsikring ASA or generate 13.77% return on investment over 90 days.

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

Microsoft  vs.  Gjensidige Forsikring ASA

Microsoft

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Gjensidige Forsikring ASA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gjensidige Forsikring ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Gjensidige Forsikring reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Gjensidige Forsikring

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

The idea behind Microsoft and Gjensidige Forsikring 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.