Correlation Between STATE and SFL

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

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

Diversification Opportunities for STATE and SFL

-0.19

Correlation Coefficient

STATE  SFL

Good diversification

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

Pair Corralation between STATE and SFL

Assuming the 90 days trading horizon STATE STR P is expected to generate 0.34 times more return on investment than SFL. However, STATE STR P is 2.97 times less risky than SFL. It trades about -0.1 of its potential returns per unit of risk. SFL Corporation is currently generating about -0.13 per unit of risk. If you would invest  9,760  in STATE STR P on December 30, 2024 and sell it today you would lose (386.00) from holding STATE STR P or give up 3.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

STATE STR P  vs.  SFL Corp.

STATE STR P

Risk-Adjusted Performance

Very Weak

Over the last 90 days STATE STR P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, STATE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

SFL Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days SFL Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with STATE and SFL

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

The idea behind STATE STR P and SFL Corporation 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.