Correlation Between FirstEnergy and Spring Valley

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

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

Diversification Opportunities for FirstEnergy and Spring Valley

-0.46

Correlation Coefficient

FirstEnergy  Spring Valley

Very good diversification

The 3 months correlation between FirstEnergy and Spring is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy 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 FirstEnergy 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 FirstEnergy 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 FirstEnergy i.e., FirstEnergy and Spring Valley go up and down completely randomly.

Pair Corralation between FirstEnergy and Spring Valley

Allowing for the 90-day total investment horizon FirstEnergy is expected to under-perform the Spring Valley. But the stock apears to be less risky and, when comparing its historical volatility, FirstEnergy is 17.96 times less risky than Spring Valley. The stock trades about -0.01 of its potential returns per unit of risk. The Spring Valley Acquisition is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7.45  in Spring Valley Acquisition on April 24, 2025 and sell it today you would earn a total of  5.55  from holding Spring Valley Acquisition or generate 74.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	68.85%
Values	Daily Returns

FirstEnergy  vs.  Spring Valley Acquisition

FirstEnergy

Risk-Adjusted Performance

Very Weak

Over the last 90 days FirstEnergy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, FirstEnergy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Spring Valley Acquisition

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spring Valley Acquisition are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward indicators, Spring Valley reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FirstEnergy and Spring Valley

The main advantage of trading using opposite FirstEnergy and Spring Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstEnergy 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 FirstEnergy 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.