Correlation Between East Africa and Spring Valley
Can any of the company-specific risk be diversified away by investing in both East Africa 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 East Africa and Spring Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Africa Metals and Spring Valley Acquisition, you can compare the effects of market volatilities on East Africa 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 East Africa with a short position of Spring Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and Spring Valley.
Diversification Opportunities for East Africa and Spring Valley
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between East and Spring is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals 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 East Africa 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 East Africa Metals 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 East Africa i.e., East Africa and Spring Valley go up and down completely randomly.
Pair Corralation between East Africa and Spring Valley
Assuming the 90 days horizon East Africa Metals is expected to generate 51.78 times more return on investment than Spring Valley. However, East Africa is 51.78 times more volatile than Spring Valley Acquisition. It trades about 0.07 of its potential returns per unit of risk. Spring Valley Acquisition is currently generating about 0.03 per unit of risk. If you would invest 6.26 in East Africa Metals on August 24, 2024 and sell it today you would earn a total of 4.74 from holding East Africa Metals or generate 75.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
East Africa Metals vs. Spring Valley Acquisition
Performance |
| Timeline |
| East Africa Metals |
| Spring Valley Acquisition |
East Africa and Spring Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Africa and Spring Valley
The main advantage of trading using opposite East Africa and Spring Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa 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.| East Africa vs. Syrah Resources Limited | East Africa vs. Nouveau Monde Graphite | East Africa vs. Small Cap Core | East Africa vs. Morningstar Unconstrained Allocation |
| Spring Valley vs. ABIVAX Socit Anonyme | Spring Valley vs. SCOR PK | Spring Valley vs. HUMANA INC | Spring Valley vs. Aquagold International |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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