Correlation Between Vanguard Small and Spring Valley

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

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

Diversification Opportunities for Vanguard Small and Spring Valley

0.1

Correlation Coefficient

Vanguard Small  Spring Valley

Average diversification

The 3 months correlation between Vanguard and Spring is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Spring Valley Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spring Valley Acquisition and Vanguard Small 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 Vanguard Small Cap Value are associated (or correlated) with Spring Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spring Valley Acquisition has no effect on the direction of Vanguard Small i.e., Vanguard Small and Spring Valley go up and down completely randomly.

Pair Corralation between Vanguard Small and Spring Valley

Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 4.78 times more return on investment than Spring Valley. However, Vanguard Small is 4.78 times more volatile than Spring Valley Acquisition. It trades about 0.06 of its potential returns per unit of risk. Spring Valley Acquisition is currently generating about 0.09 per unit of risk. If you would invest  3,685  in Vanguard Small Cap Value on September 13, 2024 and sell it today you would earn a total of  1,351  from holding Vanguard Small Cap Value or generate 36.66% return on investment over 90 days.

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

Vanguard Small Cap Value  vs.  Spring Valley Acquisition

Vanguard Small Cap

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Vanguard Small and Spring Valley

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

The idea behind Vanguard Small Cap Value and Spring Valley Acquisition 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.