Correlation Between SFL and Capital Clean

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

By analyzing existing cross correlation between SFL Corporation and Capital Clean Energy, you can compare the effects of market volatilities on SFL and Capital Clean 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 Capital Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of SFL and Capital Clean.

Diversification Opportunities for SFL and Capital Clean

0.29

Correlation Coefficient

SFL  Capital Clean

Modest diversification

The 3 months correlation between SFL and Capital is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding SFL Corp. and Capital Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Clean Energy 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 Capital Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Clean Energy has no effect on the direction of SFL i.e., SFL and Capital Clean go up and down completely randomly.

Pair Corralation between SFL and Capital Clean

Considering the 90-day investment horizon SFL Corporation is expected to under-perform the Capital Clean. But the stock apears to be less risky and, when comparing its historical volatility, SFL Corporation is 1.18 times less risky than Capital Clean. The stock trades about -0.17 of its potential returns per unit of risk. The Capital Clean Energy is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,880  in Capital Clean Energy on September 25, 2024 and sell it today you would lose (53.00) from holding Capital Clean Energy or give up 2.82% of portfolio value over 90 days.

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

SFL Corp.  vs.  Capital Clean Energy

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 unsteady 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.

Capital Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Capital Clean is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SFL and Capital Clean

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

The idea behind SFL Corporation and Capital Clean Energy 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.