Correlation Between Spring Valley and American Funds

Can any of the company-specific risk be diversified away by investing in both Spring Valley and American Funds 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 American Funds 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 American Funds New, you can compare the effects of market volatilities on Spring Valley and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spring Valley and American Funds.

Diversification Opportunities for Spring Valley and American Funds

0.3

Correlation Coefficient

Spring Valley  American Funds

Weak diversification

The 3 months correlation between Spring and American is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Spring Valley Acquisition and American Funds New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds New 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds New has no effect on the direction of Spring Valley i.e., Spring Valley and American Funds go up and down completely randomly.

Pair Corralation between Spring Valley and American Funds

Given the investment horizon of 90 days Spring Valley is expected to generate 13.92 times less return on investment than American Funds. But when comparing it to its historical volatility, Spring Valley Acquisition is 1.42 times less risky than American Funds. It trades about 0.01 of its potential returns per unit of risk. American Funds New is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,134  in American Funds New on September 13, 2024 and sell it today you would earn a total of  168.00  from holding American Funds New or generate 2.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Spring Valley Acquisition  vs.  American Funds New

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.

American Funds New

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds New are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spring Valley and American Funds

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

The idea behind Spring Valley Acquisition and American Funds New 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.