Correlation Between SFL and Radcom

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

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

Diversification Opportunities for SFL and Radcom

0.19

Correlation Coefficient

SFL  Radcom

Average diversification

The 3 months correlation between SFL and Radcom is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding SFL Corp. and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom 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 Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of SFL i.e., SFL and Radcom go up and down completely randomly.

Pair Corralation between SFL and Radcom

Considering the 90-day investment horizon SFL is expected to generate 18.59 times less return on investment than Radcom. But when comparing it to its historical volatility, SFL Corporation is 2.55 times less risky than Radcom. It trades about 0.02 of its potential returns per unit of risk. Radcom is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,008  in Radcom on October 26, 2024 and sell it today you would earn a total of  405.00  from holding Radcom or generate 40.18% return on investment over 90 days.

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

SFL Corp.  vs.  Radcom

SFL Corporation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SFL Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Radcom

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SFL and Radcom

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

The idea behind SFL Corporation and Radcom 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.