Correlation Between MicroAlgo and SPS Commerce

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

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

Diversification Opportunities for MicroAlgo and SPS Commerce

0.24

Correlation Coefficient

MicroAlgo  SPS Commerce

Modest diversification

The 3 months correlation between MicroAlgo and SPS is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding MicroAlgo and SPS Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPS Commerce and MicroAlgo 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 MicroAlgo are associated (or correlated) with SPS Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPS Commerce has no effect on the direction of MicroAlgo i.e., MicroAlgo and SPS Commerce go up and down completely randomly.

Pair Corralation between MicroAlgo and SPS Commerce

Given the investment horizon of 90 days MicroAlgo is expected to generate 58.36 times more return on investment than SPS Commerce. However, MicroAlgo is 58.36 times more volatile than SPS Commerce. It trades about 0.11 of its potential returns per unit of risk. SPS Commerce is currently generating about 0.03 per unit of risk. If you would invest  28.00  in MicroAlgo on September 14, 2024 and sell it today you would lose (15.00) from holding MicroAlgo or give up 53.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

MicroAlgo  vs.  SPS Commerce

MicroAlgo

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MicroAlgo are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, MicroAlgo displayed solid returns over the last few months and may actually be approaching a breakup point.

SPS Commerce

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPS Commerce are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SPS Commerce is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MicroAlgo and SPS Commerce

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

The idea behind MicroAlgo and SPS Commerce 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.