Correlation Between SPS Commerce and Godaddy

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

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

Diversification Opportunities for SPS Commerce and Godaddy

0.6

Correlation Coefficient

SPS Commerce  Godaddy

Poor diversification

The 3 months correlation between SPS and Godaddy is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SPS Commerce and Godaddy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Godaddy 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 Godaddy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Godaddy has no effect on the direction of SPS Commerce i.e., SPS Commerce and Godaddy go up and down completely randomly.

Pair Corralation between SPS Commerce and Godaddy

Given the investment horizon of 90 days SPS Commerce is expected to under-perform the Godaddy. In addition to that, SPS Commerce is 1.02 times more volatile than Godaddy. It trades about -0.22 of its total potential returns per unit of risk. Godaddy is currently generating about -0.07 per unit of volatility. If you would invest  19,785  in Godaddy on November 27, 2024 and sell it today you would lose (2,229) from holding Godaddy or give up 11.27% of portfolio value over 90 days.

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

SPS Commerce  vs.  Godaddy

SPS Commerce

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Godaddy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Godaddy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with SPS Commerce and Godaddy

The main advantage of trading using opposite SPS Commerce and Godaddy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPS Commerce position performs unexpectedly, Godaddy 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 Godaddy will offset losses from the drop in Godaddy's long position.

The idea behind SPS Commerce and Godaddy 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.