Correlation Between SFL and Veralto
Can any of the company-specific risk be diversified away by investing in both SFL and Veralto 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 Veralto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SFL Corporation and Veralto, you can compare the effects of market volatilities on SFL and Veralto 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 Veralto. Check out your portfolio center. Please also check ongoing floating volatility patterns of SFL and Veralto.
Diversification Opportunities for SFL and Veralto
Very poor diversification
The 3 months correlation between SFL and Veralto is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SFL Corp. and Veralto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veralto 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 Veralto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veralto has no effect on the direction of SFL i.e., SFL and Veralto go up and down completely randomly.
Pair Corralation between SFL and Veralto
Considering the 90-day investment horizon SFL is expected to generate 2.89 times less return on investment than Veralto. In addition to that, SFL is 1.0 times more volatile than Veralto. It trades about 0.02 of its total potential returns per unit of risk. Veralto is currently generating about 0.07 per unit of volatility. If you would invest 8,029 in Veralto on September 12, 2024 and sell it today you would earn a total of 2,610 from holding Veralto or generate 32.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 92.15% |
| Values | Daily Returns |
SFL Corp. vs. Veralto
Performance |
| Timeline |
| SFL Corporation |
| Veralto |
SFL and Veralto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SFL and Veralto
The main advantage of trading using opposite SFL and Veralto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SFL position performs unexpectedly, Veralto 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 Veralto will offset losses from the drop in Veralto's long position.The idea behind SFL Corporation and Veralto 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.| Veralto vs. LithiumBank Resources Corp | Veralto vs. Arrow Financial | Veralto vs. Glacier Bancorp | Veralto vs. SFL Corporation |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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