Correlation Between Global Ship and SFL

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

By analyzing existing cross correlation between Global Ship Lease and SFL Corporation, you can compare the effects of market volatilities on Global Ship and SFL 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 Global Ship with a short position of SFL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and SFL.

Diversification Opportunities for Global Ship and SFL

0.74

Correlation Coefficient

Global Ship  SFL

Poor diversification

The 3 months correlation between Global and SFL is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and SFL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFL Corporation and Global Ship 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 Global Ship Lease are associated (or correlated) with SFL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFL Corporation has no effect on the direction of Global Ship i.e., Global Ship and SFL go up and down completely randomly.

Pair Corralation between Global Ship and SFL

Considering the 90-day investment horizon Global Ship Lease is expected to under-perform the SFL. In addition to that, Global Ship is 1.25 times more volatile than SFL Corporation. It trades about -0.08 of its total potential returns per unit of risk. SFL Corporation is currently generating about -0.07 per unit of volatility. If you would invest  1,121  in SFL Corporation on September 3, 2024 and sell it today you would lose (69.00) from holding SFL Corporation or give up 6.16% of portfolio value over 90 days.

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

Global Ship Lease  vs.  SFL Corp.

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

SFL Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SFL Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, SFL 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 Global Ship and SFL

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

The idea behind Global Ship Lease and SFL Corporation 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 Transaction History module to view history of all your transactions and understand their impact on performance.