Correlation Between Spring Valley and Southern

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

Diversification Opportunities for Spring Valley and Southern

0.58

Correlation Coefficient

Spring Valley  Southern

Very weak diversification

The 3 months correlation between Spring and Southern is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Spring Valley Acquisition and Southern Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of Spring Valley i.e., Spring Valley and Southern go up and down completely randomly.

Pair Corralation between Spring Valley and Southern

Assuming the 90 days horizon Spring Valley Acquisition is expected to generate 15.21 times more return on investment than Southern. However, Spring Valley is 15.21 times more volatile than Southern Company. It trades about 0.14 of its potential returns per unit of risk. Southern Company is currently generating about 0.08 per unit of risk. If you would invest  8.83  in Spring Valley Acquisition on April 21, 2025 and sell it today you would earn a total of  5.17  from holding Spring Valley Acquisition or generate 58.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	66.67%
Values	Daily Returns

Spring Valley Acquisition  vs.  Southern Company

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 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain forward indicators, Spring Valley reported solid returns over the last few months and may actually be approaching a breakup point.

Southern

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Southern is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Spring Valley and Southern

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

The idea behind Spring Valley Acquisition and Southern Company 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.