Correlation Between Squarespace and EverCommerce

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

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

Diversification Opportunities for Squarespace and EverCommerce

0.63

Correlation Coefficient

Squarespace  EverCommerce

Poor diversification

The 3 months correlation between Squarespace and EverCommerce is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Squarespace and EverCommerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EverCommerce and Squarespace 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 Squarespace are associated (or correlated) with EverCommerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EverCommerce has no effect on the direction of Squarespace i.e., Squarespace and EverCommerce go up and down completely randomly.

Pair Corralation between Squarespace and EverCommerce

Given the investment horizon of 90 days Squarespace is expected to generate 3.47 times less return on investment than EverCommerce. But when comparing it to its historical volatility, Squarespace is 5.09 times less risky than EverCommerce. It trades about 0.22 of its potential returns per unit of risk. EverCommerce is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,035  in EverCommerce on September 1, 2024 and sell it today you would earn a total of  180.00  from holding EverCommerce or generate 17.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	52.38%
Values	Daily Returns

Squarespace  vs.  EverCommerce

Squarespace

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Squarespace has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Squarespace is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

EverCommerce

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EverCommerce are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, EverCommerce displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Squarespace and EverCommerce

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

The idea behind Squarespace and EverCommerce 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.