Correlation Between HealthStream and SPS Commerce

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

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

Diversification Opportunities for HealthStream and SPS Commerce

-0.02

Correlation Coefficient

HealthStream  SPS Commerce

Good diversification

The 3 months correlation between HealthStream and SPS is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding HealthStream and SPS Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPS Commerce and HealthStream 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 HealthStream 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 HealthStream i.e., HealthStream and SPS Commerce go up and down completely randomly.

Pair Corralation between HealthStream and SPS Commerce

Given the investment horizon of 90 days HealthStream is expected to under-perform the SPS Commerce. In addition to that, HealthStream is 1.34 times more volatile than SPS Commerce. It trades about -0.09 of its total potential returns per unit of risk. SPS Commerce is currently generating about 0.04 per unit of volatility. If you would invest  13,252  in SPS Commerce on April 23, 2025 and sell it today you would earn a total of  502.00  from holding SPS Commerce or generate 3.79% return on investment over 90 days.

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

HealthStream  vs.  SPS Commerce

HealthStream

Risk-Adjusted Performance

Very Weak

Over the last 90 days HealthStream has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in August 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

SPS Commerce

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPS Commerce are ranked lower than 3 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HealthStream and SPS Commerce

The main advantage of trading using opposite HealthStream and SPS Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HealthStream 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 HealthStream 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.