Correlation Between SPS Commerce and Zscaler

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

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

Diversification Opportunities for SPS Commerce and Zscaler

-0.07

Correlation Coefficient

SPS Commerce  Zscaler

Good diversification

The 3 months correlation between SPS and Zscaler is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding SPS Commerce and Zscaler in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zscaler 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 Zscaler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zscaler has no effect on the direction of SPS Commerce i.e., SPS Commerce and Zscaler go up and down completely randomly.

Pair Corralation between SPS Commerce and Zscaler

Given the investment horizon of 90 days SPS Commerce is expected to generate 4.08 times less return on investment than Zscaler. But when comparing it to its historical volatility, SPS Commerce is 1.46 times less risky than Zscaler. It trades about 0.02 of its potential returns per unit of risk. Zscaler is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  19,319  in Zscaler on September 1, 2024 and sell it today you would earn a total of  1,340  from holding Zscaler or generate 6.94% return on investment over 90 days.

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

SPS Commerce  vs.  Zscaler

SPS Commerce

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPS Commerce are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Zscaler

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zscaler are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Zscaler may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with SPS Commerce and Zscaler

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

The idea behind SPS Commerce and Zscaler 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.