Correlation Between SPS Commerce and OneSpan

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

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

Diversification Opportunities for SPS Commerce and OneSpan

0.3

Correlation Coefficient

SPS Commerce  OneSpan

Weak diversification

The 3 months correlation between SPS and OneSpan is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SPS Commerce and OneSpan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OneSpan 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 OneSpan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OneSpan has no effect on the direction of SPS Commerce i.e., SPS Commerce and OneSpan go up and down completely randomly.

Pair Corralation between SPS Commerce and OneSpan

Given the investment horizon of 90 days SPS Commerce is expected to under-perform the OneSpan. But the stock apears to be less risky and, when comparing its historical volatility, SPS Commerce is 1.36 times less risky than OneSpan. The stock trades about -0.01 of its potential returns per unit of risk. The OneSpan is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,605  in OneSpan on September 22, 2024 and sell it today you would earn a total of  203.00  from holding OneSpan or generate 12.65% 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.  OneSpan

SPS Commerce

Risk-Adjusted Performance

0 of 100

Very Weak

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

OneSpan

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OneSpan are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, OneSpan displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPS Commerce and OneSpan

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

The idea behind SPS Commerce and OneSpan 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.