Correlation Between Himalaya Shipping and SFL

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

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

Diversification Opportunities for Himalaya Shipping and SFL

0.76

Correlation Coefficient

Himalaya Shipping  SFL

Poor diversification

The 3 months correlation between Himalaya and SFL is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Himalaya Shipping and SFL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFL Corporation and Himalaya Shipping 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 Himalaya Shipping 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 Himalaya Shipping i.e., Himalaya Shipping and SFL go up and down completely randomly.

Pair Corralation between Himalaya Shipping and SFL

Given the investment horizon of 90 days Himalaya Shipping is expected to generate 1.92 times more return on investment than SFL. However, Himalaya Shipping is 1.92 times more volatile than SFL Corporation. It trades about 0.03 of its potential returns per unit of risk. SFL Corporation is currently generating about 0.05 per unit of risk. If you would invest  466.00  in Himalaya Shipping on September 4, 2024 and sell it today you would earn a total of  123.00  from holding Himalaya Shipping or generate 26.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.45%
Values	Daily Returns

Himalaya Shipping  vs.  SFL Corp.

Himalaya Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Himalaya Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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.

Pair Trading with Himalaya Shipping and SFL

The main advantage of trading using opposite Himalaya Shipping and SFL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Himalaya Shipping 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 Himalaya Shipping 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.