Correlation Between Advanced Health and SPS Commerce

Can any of the company-specific risk be diversified away by investing in both Advanced Health 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 Advanced Health and SPS Commerce into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advanced Health Intelligence and SPS Commerce, you can compare the effects of market volatilities on Advanced Health 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 Advanced Health with a short position of SPS Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Health and SPS Commerce.

Diversification Opportunities for Advanced Health and SPS Commerce

0.2

Correlation Coefficient

Advanced Health  SPS Commerce

Modest diversification

The 3 months correlation between Advanced and SPS is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Health Intelligence and SPS Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPS Commerce and Advanced Health 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 Advanced Health Intelligence 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 Advanced Health i.e., Advanced Health and SPS Commerce go up and down completely randomly.

Pair Corralation between Advanced Health and SPS Commerce

Assuming the 90 days horizon Advanced Health Intelligence is expected to generate 41.26 times more return on investment than SPS Commerce. However, Advanced Health is 41.26 times more volatile than SPS Commerce. It trades about 0.08 of its potential returns per unit of risk. SPS Commerce is currently generating about 0.01 per unit of risk. If you would invest  0.16  in Advanced Health Intelligence on October 10, 2024 and sell it today you would earn a total of  0.24  from holding Advanced Health Intelligence or generate 150.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Advanced Health Intelligence  vs.  SPS Commerce

Advanced Health Inte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Health Intelligence has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SPS Commerce

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPS Commerce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPS Commerce is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Advanced Health and SPS Commerce

The main advantage of trading using opposite Advanced Health and SPS Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Health 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 Advanced Health Intelligence 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.