Correlation Between SFL and Food Culture
Can any of the company-specific risk be diversified away by investing in both SFL and Food Culture 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 Food Culture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SFL Corporation and Food Culture, you can compare the effects of market volatilities on SFL and Food Culture 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 Food Culture. Check out your portfolio center. Please also check ongoing floating volatility patterns of SFL and Food Culture.
Diversification Opportunities for SFL and Food Culture
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SFL and Food is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SFL Corp. and Food Culture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Food Culture 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 Food Culture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Food Culture has no effect on the direction of SFL i.e., SFL and Food Culture go up and down completely randomly.
Pair Corralation between SFL and Food Culture
Considering the 90-day investment horizon SFL is expected to generate 176.66 times less return on investment than Food Culture. But when comparing it to its historical volatility, SFL Corporation is 82.57 times less risky than Food Culture. It trades about 0.1 of its potential returns per unit of risk. Food Culture is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2.80 in Food Culture on September 13, 2024 and sell it today you would earn a total of 22.20 from holding Food Culture or generate 792.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
SFL Corp. vs. Food Culture
Performance |
| Timeline |
| SFL Corporation |
| Food Culture |
SFL and Food Culture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SFL and Food Culture
The main advantage of trading using opposite SFL and Food Culture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SFL position performs unexpectedly, Food Culture 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 Food Culture will offset losses from the drop in Food Culture's long position.The idea behind SFL Corporation and Food Culture 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.| Food Culture vs. Paysafe | Food Culture vs. Diageo PLC ADR | Food Culture vs. Uber Technologies | Food Culture vs. Molson Coors Brewing |
Check out your portfolio center.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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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