Correlation Between WixCom and SPS Commerce

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

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

Diversification Opportunities for WixCom and SPS Commerce

0.28

Correlation Coefficient

WixCom  SPS Commerce

Modest diversification

The 3 months correlation between WixCom and SPS is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding WixCom and SPS Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPS Commerce and WixCom 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 WixCom 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 WixCom i.e., WixCom and SPS Commerce go up and down completely randomly.

Pair Corralation between WixCom and SPS Commerce

Considering the 90-day investment horizon WixCom is expected to generate 1.27 times more return on investment than SPS Commerce. However, WixCom is 1.27 times more volatile than SPS Commerce. It trades about 0.17 of its potential returns per unit of risk. SPS Commerce is currently generating about -0.01 per unit of risk. If you would invest  16,387  in WixCom on September 21, 2024 and sell it today you would earn a total of  5,356  from holding WixCom or generate 32.68% return on investment over 90 days.

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

WixCom  vs.  SPS Commerce

WixCom

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WixCom are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, WixCom showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with WixCom and SPS Commerce

The main advantage of trading using opposite WixCom and SPS Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WixCom 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 WixCom 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.