Correlation Between SPS Commerce and MicroAlgo

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

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

Diversification Opportunities for SPS Commerce and MicroAlgo

0.22

Correlation Coefficient

SPS Commerce  MicroAlgo

Modest diversification

The 3 months correlation between SPS and MicroAlgo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding SPS Commerce and MicroAlgo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroAlgo and SPS Commerce 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 SPS Commerce are associated (or correlated) with MicroAlgo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroAlgo has no effect on the direction of SPS Commerce i.e., SPS Commerce and MicroAlgo go up and down completely randomly.

Pair Corralation between SPS Commerce and MicroAlgo

Given the investment horizon of 90 days SPS Commerce is expected to generate 0.18 times more return on investment than MicroAlgo. However, SPS Commerce is 5.42 times less risky than MicroAlgo. It trades about 0.03 of its potential returns per unit of risk. MicroAlgo is currently generating about -0.01 per unit of risk. If you would invest  19,285  in SPS Commerce on September 13, 2024 and sell it today you would earn a total of  413.00  from holding SPS Commerce or generate 2.14% return on investment over 90 days.

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

SPS Commerce  vs.  MicroAlgo

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.

MicroAlgo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MicroAlgo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with SPS Commerce and MicroAlgo

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

The idea behind SPS Commerce and MicroAlgo 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.