Correlation Between Nasdaq and SPS Commerce
Can any of the company-specific risk be diversified away by investing in both Nasdaq 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 Nasdaq and SPS Commerce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and SPS Commerce, you can compare the effects of market volatilities on Nasdaq 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 Nasdaq with a short position of SPS Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and SPS Commerce.
Diversification Opportunities for Nasdaq and SPS Commerce
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Nasdaq and SPS is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and SPS Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPS Commerce and Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and SPS Commerce go up and down completely randomly.
Pair Corralation between Nasdaq and SPS Commerce
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.58 times more return on investment than SPS Commerce. However, Nasdaq Inc is 1.73 times less risky than SPS Commerce. It trades about 0.12 of its potential returns per unit of risk. SPS Commerce is currently generating about 0.02 per unit of risk. If you would invest 4,852 in Nasdaq Inc on September 12, 2024 and sell it today you would earn a total of 3,191 from holding Nasdaq Inc or generate 65.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.05% |
| Values | Daily Returns |
Nasdaq Inc vs. SPS Commerce
Performance |
| Timeline |
| Nasdaq Inc |
| SPS Commerce |
Nasdaq and SPS Commerce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and SPS Commerce
The main advantage of trading using opposite Nasdaq and SPS Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc 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. SPARTAN STORES | SPS Commerce vs. Apollo Medical Holdings | SPS Commerce vs. Diamyd Medical AB | SPS Commerce vs. QURATE RETAIL INC |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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