Correlation Between Patrick Industries and SPS Commerce

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

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

Diversification Opportunities for Patrick Industries and SPS Commerce

-0.36

Correlation Coefficient

Patrick Industries  SPS Commerce

Very good diversification

The 3 months correlation between Patrick and SPS is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Patrick Industries and SPS Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPS Commerce and Patrick Industries 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 Patrick Industries 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 Patrick Industries i.e., Patrick Industries and SPS Commerce go up and down completely randomly.

Pair Corralation between Patrick Industries and SPS Commerce

Given the investment horizon of 90 days Patrick Industries is expected to generate 0.95 times more return on investment than SPS Commerce. However, Patrick Industries is 1.05 times less risky than SPS Commerce. It trades about 0.18 of its potential returns per unit of risk. SPS Commerce is currently generating about -0.01 per unit of risk. If you would invest  8,245  in Patrick Industries on May 2, 2025 and sell it today you would earn a total of  1,865  from holding Patrick Industries or generate 22.62% return on investment over 90 days.

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

Patrick Industries  vs.  SPS Commerce

Patrick Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patrick Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Patrick Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 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 Patrick Industries and SPS Commerce

The main advantage of trading using opposite Patrick Industries and SPS Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patrick Industries 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 Patrick Industries 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.