Correlation Between SPS Commerce and New Relic
Can any of the company-specific risk be diversified away by investing in both SPS Commerce and New Relic 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 New Relic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPS Commerce and New Relic, you can compare the effects of market volatilities on SPS Commerce and New Relic 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 New Relic. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPS Commerce and New Relic.
Diversification Opportunities for SPS Commerce and New Relic
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SPS and New is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding SPS Commerce and New Relic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Relic 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 New Relic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Relic has no effect on the direction of SPS Commerce i.e., SPS Commerce and New Relic go up and down completely randomly.
Pair Corralation between SPS Commerce and New Relic
Given the investment horizon of 90 days SPS Commerce is expected to generate 1.88 times less return on investment than New Relic. But when comparing it to its historical volatility, SPS Commerce is 1.23 times less risky than New Relic. It trades about 0.05 of its potential returns per unit of risk. New Relic is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,699 in New Relic on August 28, 2024 and sell it today you would earn a total of 1,465 from holding New Relic or generate 25.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 31.72% |
| Values | Daily Returns |
SPS Commerce vs. New Relic
Performance |
| Timeline |
| SPS Commerce |
| New Relic |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
SPS Commerce and New Relic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPS Commerce and New Relic
The main advantage of trading using opposite SPS Commerce and New Relic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPS Commerce position performs unexpectedly, New Relic 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 New Relic will offset losses from the drop in New Relic's long position.The idea behind SPS Commerce and New Relic 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |