Correlation Between GM and SPS Commerce
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and SPS Commerce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and SPS Commerce, you can compare the effects of market volatilities on GM 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 GM with a short position of SPS Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and SPS Commerce.
Diversification Opportunities for GM and SPS Commerce
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between GM and SPS is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SPS Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPS Commerce and GM 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 General Motors 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 GM i.e., GM and SPS Commerce go up and down completely randomly.
Pair Corralation between GM and SPS Commerce
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the SPS Commerce. In addition to that, GM is 1.36 times more volatile than SPS Commerce. It trades about -0.16 of its total potential returns per unit of risk. SPS Commerce is currently generating about 0.16 per unit of volatility. If you would invest 17,500 in SPS Commerce on September 13, 2024 and sell it today you would earn a total of 1,200 from holding SPS Commerce or generate 6.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Motors vs. SPS Commerce
Performance |
| Timeline |
| General Motors |
| SPS Commerce |
GM and SPS Commerce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and SPS Commerce
The main advantage of trading using opposite GM and SPS Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| SPS Commerce vs. PLAYTIKA HOLDING DL 01 | SPS Commerce vs. Caseys General Stores | SPS Commerce vs. National Retail Properties | SPS Commerce vs. PROSIEBENSAT1 MEDIADR4 |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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