Correlation Between CDL INVESTMENT and Commerce Bancshares

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

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

Diversification Opportunities for CDL INVESTMENT and Commerce Bancshares

0.41

Correlation Coefficient

CDL INVESTMENT  Commerce Bancshares

Very weak diversification

The 3 months correlation between CDL and Commerce is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding CDL INVESTMENT and Commerce Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce Bancshares and CDL INVESTMENT 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 CDL INVESTMENT are associated (or correlated) with Commerce Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerce Bancshares has no effect on the direction of CDL INVESTMENT i.e., CDL INVESTMENT and Commerce Bancshares go up and down completely randomly.

Pair Corralation between CDL INVESTMENT and Commerce Bancshares

Assuming the 90 days trading horizon CDL INVESTMENT is expected to under-perform the Commerce Bancshares. In addition to that, CDL INVESTMENT is 1.81 times more volatile than Commerce Bancshares. It trades about -0.12 of its total potential returns per unit of risk. Commerce Bancshares is currently generating about 0.13 per unit of volatility. If you would invest  6,050  in Commerce Bancshares on October 22, 2024 and sell it today you would earn a total of  150.00  from holding Commerce Bancshares or generate 2.48% return on investment over 90 days.

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

CDL INVESTMENT  vs.  Commerce Bancshares

CDL INVESTMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDL INVESTMENT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CDL INVESTMENT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Commerce Bancshares

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commerce Bancshares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Commerce Bancshares reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CDL INVESTMENT and Commerce Bancshares

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

The idea behind CDL INVESTMENT and Commerce Bancshares 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.