Correlation Between Akamai Technologies and SPS Commerce

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

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

Diversification Opportunities for Akamai Technologies and SPS Commerce

0.63

Correlation Coefficient

Akamai Technologies  SPS Commerce

Poor diversification

The 3 months correlation between Akamai and SPS is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Akamai Technologies and SPS Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPS Commerce and Akamai Technologies 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 Akamai Technologies 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 Akamai Technologies i.e., Akamai Technologies and SPS Commerce go up and down completely randomly.

Pair Corralation between Akamai Technologies and SPS Commerce

Given the investment horizon of 90 days Akamai Technologies is expected to generate 0.62 times more return on investment than SPS Commerce. However, Akamai Technologies is 1.62 times less risky than SPS Commerce. It trades about 0.08 of its potential returns per unit of risk. SPS Commerce is currently generating about 0.04 per unit of risk. If you would invest  7,888  in Akamai Technologies on February 3, 2024 and sell it today you would earn a total of  2,079  from holding Akamai Technologies or generate 26.36% return on investment over 90 days.

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

Akamai Technologies  vs.  SPS Commerce

Akamai Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akamai Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

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.

Pair Trading with Akamai Technologies and SPS Commerce

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

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.