Correlation Between SFL and Enersys

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

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

Diversification Opportunities for SFL and Enersys

0.75

Correlation Coefficient

SFL  Enersys

Poor diversification

The 3 months correlation between SFL and Enersys is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SFL Corp. and Enersys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enersys 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 Enersys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enersys has no effect on the direction of SFL i.e., SFL and Enersys go up and down completely randomly.

Pair Corralation between SFL and Enersys

Considering the 90-day investment horizon SFL Corporation is expected to generate 1.0 times more return on investment than Enersys. However, SFL is 1.0 times more volatile than Enersys. It trades about 0.0 of its potential returns per unit of risk. Enersys is currently generating about -0.02 per unit of risk. If you would invest  1,062  in SFL Corporation on September 19, 2024 and sell it today you would lose (59.00) from holding SFL Corporation or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

SFL Corp.  vs.  Enersys

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 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.

Enersys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enersys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with SFL and Enersys

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

The idea behind SFL Corporation and Enersys 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.