Correlation Between Microsoft and SPS Commerce
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and SPS Commerce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and SPS Commerce, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of SPS Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and SPS Commerce.
Diversification Opportunities for Microsoft and SPS Commerce
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and SPS is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and SPS Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPS Commerce and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and SPS Commerce go up and down completely randomly.
Pair Corralation between Microsoft and SPS Commerce
Given the investment horizon of 90 days Microsoft is expected to under-perform the SPS Commerce. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.33 times less risky than SPS Commerce. The stock trades about -0.04 of its potential returns per unit of risk. The SPS Commerce is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 17,101 in SPS Commerce on August 27, 2024 and sell it today you would earn a total of 2,238 from holding SPS Commerce or generate 13.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. SPS Commerce
Performance |
| Timeline |
| Microsoft |
| SPS Commerce |
Microsoft and SPS Commerce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and SPS Commerce
The main advantage of trading using opposite Microsoft and SPS Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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