Correlation Between SFL and Atmus Filtration

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

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

Diversification Opportunities for SFL and Atmus Filtration

-0.53

Correlation Coefficient

SFL  Atmus Filtration

Excellent diversification

The 3 months correlation between SFL and Atmus is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding SFL Corp. and Atmus Filtration Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmus Filtration Tec and SFL 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 SFL Corporation are associated (or correlated) with Atmus Filtration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmus Filtration Tec has no effect on the direction of SFL i.e., SFL and Atmus Filtration go up and down completely randomly.

Pair Corralation between SFL and Atmus Filtration

Considering the 90-day investment horizon SFL Corporation is expected to generate 1.14 times more return on investment than Atmus Filtration. However, SFL is 1.14 times more volatile than Atmus Filtration Technologies. It trades about -0.11 of its potential returns per unit of risk. Atmus Filtration Technologies is currently generating about -0.45 per unit of risk. If you would invest  1,049  in SFL Corporation on September 25, 2024 and sell it today you would lose (34.00) from holding SFL Corporation or give up 3.24% of portfolio value over 90 days.

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

SFL Corp.  vs.  Atmus Filtration Technologies

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 latest weak performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Atmus Filtration Tec

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Atmus Filtration Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Atmus Filtration may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SFL and Atmus Filtration

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

The idea behind SFL Corporation and Atmus Filtration Technologies 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.