Correlation Between Volaris and SFL

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

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

Diversification Opportunities for Volaris and SFL

0.3

Correlation Coefficient

Volaris  SFL

Weak diversification

The 3 months correlation between Volaris and SFL is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Volaris and SFL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFL Corporation and Volaris 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 Volaris 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 Volaris i.e., Volaris and SFL go up and down completely randomly.

Pair Corralation between Volaris and SFL

Given the investment horizon of 90 days Volaris is expected to under-perform the SFL. In addition to that, Volaris is 1.61 times more volatile than SFL Corporation. It trades about -0.09 of its total potential returns per unit of risk. SFL Corporation is currently generating about -0.1 per unit of volatility. If you would invest  1,024  in SFL Corporation on November 28, 2024 and sell it today you would lose (115.50) from holding SFL Corporation or give up 11.28% of portfolio value over 90 days.

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

Volaris  vs.  SFL Corp.

Volaris

Risk-Adjusted Performance

Very Weak

Over the last 90 days Volaris has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private 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 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.

Pair Trading with Volaris and SFL

The main advantage of trading using opposite Volaris and SFL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volaris 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 Volaris 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.