Correlation Between Visa and SPS Commerce
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and SPS Commerce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and SPS Commerce, you can compare the effects of market volatilities on Visa 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 Visa with a short position of SPS Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and SPS Commerce.
Diversification Opportunities for Visa and SPS Commerce
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Visa and SPS is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and SPS Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPS Commerce and Visa 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 Visa Class A 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 Visa i.e., Visa and SPS Commerce go up and down completely randomly.
Pair Corralation between Visa and SPS Commerce
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.47 times more return on investment than SPS Commerce. However, Visa Class A is 2.11 times less risky than SPS Commerce. It trades about 0.09 of its potential returns per unit of risk. SPS Commerce is currently generating about 0.02 per unit of risk. If you would invest 25,267 in Visa Class A on August 31, 2024 and sell it today you would earn a total of 6,203 from holding Visa Class A or generate 24.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. SPS Commerce
Performance |
| Timeline |
| Visa Class A |
| SPS Commerce |
Visa and SPS Commerce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and SPS Commerce
The main advantage of trading using opposite Visa and SPS Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| SPS Commerce vs. Tenable Holdings | SPS Commerce vs. Rapid7 Inc | SPS Commerce vs. F5 Networks | SPS Commerce vs. Check Point Software |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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