Correlation Between SFL and Himalaya Shipping
Can any of the company-specific risk be diversified away by investing in both SFL and Himalaya Shipping 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 Himalaya Shipping into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SFL Corporation and Himalaya Shipping, you can compare the effects of market volatilities on SFL and Himalaya Shipping 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 Himalaya Shipping. Check out your portfolio center. Please also check ongoing floating volatility patterns of SFL and Himalaya Shipping.
Diversification Opportunities for SFL and Himalaya Shipping
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SFL and Himalaya is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SFL Corp. and Himalaya Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Himalaya Shipping 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 Himalaya Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Himalaya Shipping has no effect on the direction of SFL i.e., SFL and Himalaya Shipping go up and down completely randomly.
Pair Corralation between SFL and Himalaya Shipping
Considering the 90-day investment horizon SFL is expected to generate 3.78 times less return on investment than Himalaya Shipping. But when comparing it to its historical volatility, SFL Corporation is 1.44 times less risky than Himalaya Shipping. It trades about 0.08 of its potential returns per unit of risk. Himalaya Shipping is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 639.00 in Himalaya Shipping on August 27, 2024 and sell it today you would earn a total of 53.00 from holding Himalaya Shipping or generate 8.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SFL Corp. vs. Himalaya Shipping
Performance |
| Timeline |
| SFL Corporation |
| Himalaya Shipping |
SFL and Himalaya Shipping Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SFL and Himalaya Shipping
The main advantage of trading using opposite SFL and Himalaya Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SFL position performs unexpectedly, Himalaya Shipping 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 Himalaya Shipping will offset losses from the drop in Himalaya Shipping's long position.The idea behind SFL Corporation and Himalaya Shipping 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.| Himalaya Shipping vs. Solstad Offshore ASA | Himalaya Shipping vs. MYR Group | Himalaya Shipping vs. Chester Mining | Himalaya Shipping vs. Park Ohio Holdings |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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