Correlation Between Gjensidige Forsikring and Equinor ASA

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

Diversification Opportunities for Gjensidige Forsikring and Equinor ASA

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between Gjensidige and Equinor is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gjensidige Forsikring ASA and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor 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 Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA has no effect on the direction of Gjensidige Forsikring i.e., Gjensidige Forsikring and Equinor ASA go up and down completely randomly.

Pair Corralation between Gjensidige Forsikring and Equinor ASA

Assuming the 90 days trading horizon Gjensidige Forsikring ASA is expected to generate 0.77 times more return on investment than Equinor ASA. However, Gjensidige Forsikring ASA is 1.31 times less risky than Equinor ASA. It trades about 0.07 of its potential returns per unit of risk. Equinor ASA is currently generating about 0.01 per unit of risk. If you would invest  15,278  in Gjensidige Forsikring ASA on August 25, 2024 and sell it today you would earn a total of  4,272  from holding Gjensidige Forsikring ASA or generate 27.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Gjensidige Forsikring ASA  vs.  Equinor ASA

 Performance 
       Timeline  
Gjensidige Forsikring ASA 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Gjensidige Forsikring ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Gjensidige Forsikring may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Equinor ASA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Equinor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Equinor ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Gjensidige Forsikring and Equinor ASA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gjensidige Forsikring and Equinor ASA

The main advantage of trading using opposite Gjensidige Forsikring and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gjensidige Forsikring position performs unexpectedly, Equinor 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 Equinor ASA will offset losses from the drop in Equinor ASA's long position.
The idea behind Gjensidige Forsikring ASA and Equinor 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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