Correlation Between SFL and Papaya Growth

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

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

Diversification Opportunities for SFL and Papaya Growth

0.14

Correlation Coefficient

SFL  Papaya Growth

Average diversification

The 3 months correlation between SFL and Papaya is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding SFL Corp. and Papaya Growth Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papaya Growth Opportunity 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 Papaya Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papaya Growth Opportunity has no effect on the direction of SFL i.e., SFL and Papaya Growth go up and down completely randomly.

Pair Corralation between SFL and Papaya Growth

If you would invest  1,120  in Papaya Growth Opportunity on September 2, 2024 and sell it today you would lose (1.00) from holding Papaya Growth Opportunity or give up 0.09% of portfolio value over 90 days.

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

SFL Corp.  vs.  Papaya Growth Opportunity

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.

Papaya Growth Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Papaya Growth Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SFL and Papaya Growth

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

The idea behind SFL Corporation and Papaya Growth Opportunity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.