Correlation Between SPS Commerce and Dorman Products

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

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

Diversification Opportunities for SPS Commerce and Dorman Products

0.4

Correlation Coefficient

SPS Commerce  Dorman Products

Very weak diversification

The 3 months correlation between SPS and Dorman is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SPS Commerce and Dorman Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorman Products 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 Dorman Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorman Products has no effect on the direction of SPS Commerce i.e., SPS Commerce and Dorman Products go up and down completely randomly.

Pair Corralation between SPS Commerce and Dorman Products

Given the investment horizon of 90 days SPS Commerce is expected to under-perform the Dorman Products. In addition to that, SPS Commerce is 1.24 times more volatile than Dorman Products. It trades about -0.01 of its total potential returns per unit of risk. Dorman Products is currently generating about 0.08 per unit of volatility. If you would invest  11,330  in Dorman Products on April 30, 2025 and sell it today you would earn a total of  856.00  from holding Dorman Products or generate 7.56% return on investment over 90 days.

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

SPS Commerce  vs.  Dorman Products

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.

Dorman Products

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dorman Products are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dorman Products may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with SPS Commerce and Dorman Products

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

The idea behind SPS Commerce and Dorman Products 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.