Correlation Between SFL and Stardust Power

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

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

Diversification Opportunities for SFL and Stardust Power

0.7

Correlation Coefficient

SFL  Stardust Power

Poor diversification

The 3 months correlation between SFL and Stardust is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SFL Corp. and Stardust Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stardust Power 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 Stardust Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stardust Power has no effect on the direction of SFL i.e., SFL and Stardust Power go up and down completely randomly.

Pair Corralation between SFL and Stardust Power

Considering the 90-day investment horizon SFL Corporation is expected to under-perform the Stardust Power. But the stock apears to be less risky and, when comparing its historical volatility, SFL Corporation is 11.27 times less risky than Stardust Power. The stock trades about -0.05 of its potential returns per unit of risk. The Stardust Power is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Stardust Power on September 12, 2024 and sell it today you would lose (8.68) from holding Stardust Power or give up 20.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	82.81%
Values	Daily Returns

SFL Corp.  vs.  Stardust Power

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.

Stardust Power

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stardust Power are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Stardust Power showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SFL and Stardust Power

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

The idea behind SFL Corporation and Stardust Power 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.