Correlation Between SPS Commerce and Patrick Industries

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

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

Diversification Opportunities for SPS Commerce and Patrick Industries

-0.48

Correlation Coefficient

SPS Commerce  Patrick Industries

Very good diversification

The 3 months correlation between SPS and Patrick is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding SPS Commerce and Patrick Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patrick Industries 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 Patrick Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patrick Industries has no effect on the direction of SPS Commerce i.e., SPS Commerce and Patrick Industries go up and down completely randomly.

Pair Corralation between SPS Commerce and Patrick Industries

Given the investment horizon of 90 days SPS Commerce is expected to under-perform the Patrick Industries. In addition to that, SPS Commerce is 1.73 times more volatile than Patrick Industries. It trades about -0.1 of its total potential returns per unit of risk. Patrick Industries is currently generating about 0.2 per unit of volatility. If you would invest  8,081  in Patrick Industries on May 7, 2025 and sell it today you would earn a total of  2,193  from holding Patrick Industries or generate 27.14% return on investment over 90 days.

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

SPS Commerce  vs.  Patrick Industries

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.

Patrick Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patrick Industries are ranked lower than 15 (%) 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.

Pair Trading with SPS Commerce and Patrick Industries

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

The idea behind SPS Commerce and Patrick Industries 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.