Correlation Between Spring Valley and Visa

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

Diversification Opportunities for Spring Valley and Visa

-0.26

Correlation Coefficient

Spring Valley  Visa

Very good diversification

The 3 months correlation between Spring and Visa is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Spring Valley Acquisition and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Spring Valley i.e., Spring Valley and Visa go up and down completely randomly.

Pair Corralation between Spring Valley and Visa

Assuming the 90 days horizon Spring Valley Acquisition is expected to under-perform the Visa. But the stock apears to be less risky and, when comparing its historical volatility, Spring Valley Acquisition is 2.52 times less risky than Visa. The stock trades about -0.05 of its potential returns per unit of risk. The Visa Class A is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  31,101  in Visa Class A on October 7, 2024 and sell it today you would earn a total of  390.00  from holding Visa Class A or generate 1.25% return on investment over 90 days.

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

Spring Valley Acquisition  vs.  Visa Class A

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. In spite of comparatively stable forward indicators, Spring Valley is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Visa Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spring Valley and Visa

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

The idea behind Spring Valley Acquisition and Visa Class A 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.