Correlation Between Spring Valley and Japan Post

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

Diversification Opportunities for Spring Valley and Japan Post

0.36

Correlation Coefficient

Spring Valley  Japan Post

Weak diversification

The 3 months correlation between Spring and Japan is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Spring Valley Acquisition and Japan Post Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Post Holdings 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 Japan Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Post Holdings has no effect on the direction of Spring Valley i.e., Spring Valley and Japan Post go up and down completely randomly.

Pair Corralation between Spring Valley and Japan Post

Given the investment horizon of 90 days Spring Valley is expected to generate 57.6 times less return on investment than Japan Post. But when comparing it to its historical volatility, Spring Valley Acquisition is 5.95 times less risky than Japan Post. It trades about 0.01 of its potential returns per unit of risk. Japan Post Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  938.00  in Japan Post Holdings on September 14, 2024 and sell it today you would earn a total of  62.00  from holding Japan Post Holdings or generate 6.61% 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.  Japan Post Holdings

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.

Japan Post Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Post Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, Japan Post may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Spring Valley and Japan Post

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

The idea behind Spring Valley Acquisition and Japan Post Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.