Correlation Between Shopify and Sparta Commercial

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

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

Diversification Opportunities for Shopify and Sparta Commercial

-0.79

Correlation Coefficient

Shopify  Sparta Commercial

Pay attention - limited upside

The 3 months correlation between Shopify and Sparta is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and Sparta Commercial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Commercial and Shopify 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 Shopify are associated (or correlated) with Sparta Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Commercial has no effect on the direction of Shopify i.e., Shopify and Sparta Commercial go up and down completely randomly.

Pair Corralation between Shopify and Sparta Commercial

Given the investment horizon of 90 days Shopify is expected to generate 0.3 times more return on investment than Sparta Commercial. However, Shopify is 3.36 times less risky than Sparta Commercial. It trades about 0.21 of its potential returns per unit of risk. Sparta Commercial Services is currently generating about -0.22 per unit of risk. If you would invest  10,588  in Shopify on September 17, 2024 and sell it today you would earn a total of  875.00  from holding Shopify or generate 8.26% return on investment over 90 days.

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

Shopify  vs.  Sparta Commercial Services

Shopify

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Shopify reported solid returns over the last few months and may actually be approaching a breakup point.

Sparta Commercial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Commercial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Shopify and Sparta Commercial

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

The idea behind Shopify and Sparta Commercial Services 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 Stocks Directory module to find actively traded stocks across global markets.