Correlation Between SPS Commerce and MongoDB

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

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

Diversification Opportunities for SPS Commerce and MongoDB

0.02

Correlation Coefficient

SPS Commerce  MongoDB

Significant diversification

The 3 months correlation between SPS and MongoDB is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SPS Commerce and MongoDB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MongoDB 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 MongoDB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MongoDB has no effect on the direction of SPS Commerce i.e., SPS Commerce and MongoDB go up and down completely randomly.

Pair Corralation between SPS Commerce and MongoDB

Given the investment horizon of 90 days SPS Commerce is expected to under-perform the MongoDB. But the stock apears to be less risky and, when comparing its historical volatility, SPS Commerce is 1.39 times less risky than MongoDB. The stock trades about -0.22 of its potential returns per unit of risk. The MongoDB is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  32,460  in MongoDB on November 27, 2024 and sell it today you would lose (6,490) from holding MongoDB or give up 19.99% of portfolio value over 90 days.

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

SPS Commerce  vs.  MongoDB

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.

MongoDB

Risk-Adjusted Performance

Very Weak

Over the last 90 days MongoDB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with SPS Commerce and MongoDB

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

The idea behind SPS Commerce and MongoDB 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.