Correlation Between SFL and GEORGIA

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

By analyzing existing cross correlation between SFL Corporation and GEORGIA PWR 475, you can compare the effects of market volatilities on SFL and GEORGIA 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 GEORGIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SFL and GEORGIA.

Diversification Opportunities for SFL and GEORGIA

0.38

Correlation Coefficient

SFL  GEORGIA

Weak diversification

The 3 months correlation between SFL and GEORGIA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding SFL Corp. and GEORGIA PWR 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEORGIA PWR 475 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 GEORGIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEORGIA PWR 475 has no effect on the direction of SFL i.e., SFL and GEORGIA go up and down completely randomly.

Pair Corralation between SFL and GEORGIA

Considering the 90-day investment horizon SFL Corporation is expected to under-perform the GEORGIA. But the stock apears to be less risky and, when comparing its historical volatility, SFL Corporation is 1.02 times less risky than GEORGIA. The stock trades about -0.13 of its potential returns per unit of risk. The GEORGIA PWR 475 is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  9,881  in GEORGIA PWR 475 on September 14, 2024 and sell it today you would lose (487.00) from holding GEORGIA PWR 475 or give up 4.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	60.94%
Values	Daily Returns

SFL Corp.  vs.  GEORGIA PWR 475

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 abnormal 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.

GEORGIA PWR 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEORGIA PWR 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for GEORGIA PWR 475 investors.

Pair Trading with SFL and GEORGIA

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

The idea behind SFL Corporation and GEORGIA PWR 475 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.