Correlation Between International Seaways and SFL

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

By analyzing existing cross correlation between International Seaways and SFL Corporation, you can compare the effects of market volatilities on International Seaways and SFL 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 International Seaways with a short position of SFL. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Seaways and SFL.

Diversification Opportunities for International Seaways and SFL

0.56

Correlation Coefficient

International Seaways  SFL

Very weak diversification

The 3 months correlation between International and SFL is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding International Seaways and SFL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFL Corporation and International Seaways 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 International Seaways are associated (or correlated) with SFL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFL Corporation has no effect on the direction of International Seaways i.e., International Seaways and SFL go up and down completely randomly.

Pair Corralation between International Seaways and SFL

Given the investment horizon of 90 days International Seaways is expected to generate 2.44 times less return on investment than SFL. In addition to that, International Seaways is 1.22 times more volatile than SFL Corporation. It trades about 0.04 of its total potential returns per unit of risk. SFL Corporation is currently generating about 0.12 per unit of volatility. If you would invest  1,320  in SFL Corporation on February 3, 2024 and sell it today you would earn a total of  43.00  from holding SFL Corporation or generate 3.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

International Seaways  vs.  SFL Corp.

International Seaways

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Seaways are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, International Seaways may actually be approaching a critical reversion point that can send shares even higher in June 2024.

SFL Corporation

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SFL Corporation are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical and fundamental indicators, SFL disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Seaways and SFL

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

The idea behind International Seaways and SFL Corporation 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.