Correlation Between Commerce Bancshares and Singapore Telecommunicatio

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

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

Diversification Opportunities for Commerce Bancshares and Singapore Telecommunicatio

-0.1

Correlation Coefficient

Commerce Bancshares  Singapore Telecommunicatio

Good diversification

The 3 months correlation between Commerce and Singapore is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Commerce Bancshares and Singapore Telecommunications L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Telecommunicatio and Commerce Bancshares 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 Commerce Bancshares are associated (or correlated) with Singapore Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Telecommunicatio has no effect on the direction of Commerce Bancshares i.e., Commerce Bancshares and Singapore Telecommunicatio go up and down completely randomly.

Pair Corralation between Commerce Bancshares and Singapore Telecommunicatio

Assuming the 90 days horizon Commerce Bancshares is expected to generate 1.46 times more return on investment than Singapore Telecommunicatio. However, Commerce Bancshares is 1.46 times more volatile than Singapore Telecommunications Limited. It trades about 0.11 of its potential returns per unit of risk. Singapore Telecommunications Limited is currently generating about -0.03 per unit of risk. If you would invest  5,264  in Commerce Bancshares on September 22, 2024 and sell it today you would earn a total of  836.00  from holding Commerce Bancshares or generate 15.88% return on investment over 90 days.

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

Commerce Bancshares  vs.  Singapore Telecommunications L

Commerce Bancshares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commerce Bancshares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Commerce Bancshares reported solid returns over the last few months and may actually be approaching a breakup point.

Singapore Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Singapore Telecommunications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Singapore Telecommunicatio is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Commerce Bancshares and Singapore Telecommunicatio

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

The idea behind Commerce Bancshares and Singapore Telecommunications Limited 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.