Correlation Between SPS Commerce and Installed Building

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

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

Diversification Opportunities for SPS Commerce and Installed Building

-0.75

Correlation Coefficient

SPS Commerce  Installed Building

Pay attention - limited upside

The 3 months correlation between SPS and Installed is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding SPS Commerce and Installed Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Installed Building 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 Installed Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Installed Building has no effect on the direction of SPS Commerce i.e., SPS Commerce and Installed Building go up and down completely randomly.

Pair Corralation between SPS Commerce and Installed Building

Given the investment horizon of 90 days SPS Commerce is expected to under-perform the Installed Building. But the stock apears to be less risky and, when comparing its historical volatility, SPS Commerce is 1.04 times less risky than Installed Building. The stock trades about -0.11 of its potential returns per unit of risk. The Installed Building Products is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  16,128  in Installed Building Products on May 18, 2025 and sell it today you would earn a total of  10,593  from holding Installed Building Products or generate 65.68% return on investment over 90 days.

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

SPS Commerce  vs.  Installed Building Products

SPS Commerce

Risk-Adjusted Performance

Weakest

Over the last 90 days SPS Commerce 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 rather sound which may send shares a bit higher in September 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Installed Building

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Installed Building Products are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental drivers, Installed Building reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPS Commerce and Installed Building

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

The idea behind SPS Commerce and Installed Building 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 Stocks Directory module to find actively traded stocks across global markets.