Correlation Between SPS Commerce and HealthStream

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

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

Diversification Opportunities for SPS Commerce and HealthStream

-0.01

Correlation Coefficient

SPS Commerce  HealthStream

Good diversification

The 3 months correlation between SPS and HealthStream is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding SPS Commerce and HealthStream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthStream 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 HealthStream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HealthStream has no effect on the direction of SPS Commerce i.e., SPS Commerce and HealthStream go up and down completely randomly.

Pair Corralation between SPS Commerce and HealthStream

Given the investment horizon of 90 days SPS Commerce is expected to generate 0.75 times more return on investment than HealthStream. However, SPS Commerce is 1.33 times less risky than HealthStream. It trades about 0.05 of its potential returns per unit of risk. HealthStream is currently generating about -0.08 per unit of risk. If you would invest  12,972  in SPS Commerce on April 22, 2025 and sell it today you would earn a total of  782.00  from holding SPS Commerce or generate 6.03% return on investment over 90 days.

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

SPS Commerce  vs.  HealthStream

SPS Commerce

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPS Commerce are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, SPS Commerce may actually be approaching a critical reversion point that can send shares even higher in August 2025.

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.

Pair Trading with SPS Commerce and HealthStream

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

The idea behind SPS Commerce and HealthStream 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.