Correlation Between SFL and HNI Corp

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

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

Diversification Opportunities for SFL and HNI Corp

-0.22

Correlation Coefficient

SFL  HNI Corp

Very good diversification

The 3 months correlation between SFL and HNI is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding SFL Corp. and HNI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNI Corp 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 HNI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNI Corp has no effect on the direction of SFL i.e., SFL and HNI Corp go up and down completely randomly.

Pair Corralation between SFL and HNI Corp

Considering the 90-day investment horizon SFL is expected to generate 2.13 times less return on investment than HNI Corp. But when comparing it to its historical volatility, SFL Corporation is 1.19 times less risky than HNI Corp. It trades about 0.04 of its potential returns per unit of risk. HNI Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,779  in HNI Corp on September 27, 2024 and sell it today you would earn a total of  2,373  from holding HNI Corp or generate 85.39% return on investment over 90 days.

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

SFL Corp.  vs.  HNI Corp

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.

HNI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HNI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, HNI Corp is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SFL and HNI Corp

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

The idea behind SFL Corporation and HNI Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.