Correlation Between SFL and Tesla
Can any of the company-specific risk be diversified away by investing in both SFL and Tesla 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 Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SFL Corporation and Tesla Inc, you can compare the effects of market volatilities on SFL and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of SFL and Tesla.
Diversification Opportunities for SFL and Tesla
Excellent diversification
The 3 months correlation between SFL and Tesla is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding SFL Corp. and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of SFL i.e., SFL and Tesla go up and down completely randomly.
Pair Corralation between SFL and Tesla
Considering the 90-day investment horizon SFL is expected to generate 10.21 times less return on investment than Tesla. But when comparing it to its historical volatility, SFL Corporation is 2.32 times less risky than Tesla. It trades about 0.01 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 24,384 in Tesla Inc on September 3, 2024 and sell it today you would earn a total of 11,325 from holding Tesla Inc or generate 46.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SFL Corp. vs. Tesla Inc
Performance |
| Timeline |
| SFL Corporation |
| Tesla Inc |
SFL and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SFL and Tesla
The main advantage of trading using opposite SFL and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SFL position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.The idea behind SFL Corporation and Tesla Inc 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.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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