Correlation Between Spring Valley and Absa Group

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

By analyzing existing cross correlation between Spring Valley Acquisition and Absa Group Limited, you can compare the effects of market volatilities on Spring Valley and Absa Group 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 Spring Valley with a short position of Absa Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spring Valley and Absa Group.

Diversification Opportunities for Spring Valley and Absa Group

0.17

Correlation Coefficient

Spring Valley  Absa Group

Average diversification

The 3 months correlation between Spring and Absa is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Spring Valley Acquisition and Absa Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa Group Limited and Spring Valley 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 Spring Valley Acquisition are associated (or correlated) with Absa Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absa Group Limited has no effect on the direction of Spring Valley i.e., Spring Valley and Absa Group go up and down completely randomly.

Pair Corralation between Spring Valley and Absa Group

If you would invest  1,122  in Spring Valley Acquisition on September 14, 2024 and sell it today you would earn a total of  1.00  from holding Spring Valley Acquisition or generate 0.09% return on investment over 90 days.

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

Spring Valley Acquisition  vs.  Absa Group Limited

Spring Valley Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spring Valley Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Spring Valley is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Absa Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absa Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Absa Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Spring Valley and Absa Group

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

The idea behind Spring Valley Acquisition and Absa Group Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.