Correlation Between Commerce Bancshares and KKR Co

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

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

Diversification Opportunities for Commerce Bancshares and KKR Co

0.92

Correlation Coefficient

Commerce Bancshares  KKR Co

Almost no diversification

The 3 months correlation between Commerce and KKR is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Commerce Bancshares and KKR Co LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR Co LP 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 KKR Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR Co LP has no effect on the direction of Commerce Bancshares i.e., Commerce Bancshares and KKR Co go up and down completely randomly.

Pair Corralation between Commerce Bancshares and KKR Co

Given the investment horizon of 90 days Commerce Bancshares is expected to under-perform the KKR Co. But the stock apears to be less risky and, when comparing its historical volatility, Commerce Bancshares is 1.9 times less risky than KKR Co. The stock trades about -0.42 of its potential returns per unit of risk. The KKR Co LP is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  16,127  in KKR Co LP on September 27, 2024 and sell it today you would lose (875.00) from holding KKR Co LP or give up 5.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Commerce Bancshares  vs.  KKR Co LP

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 fairly fragile basic indicators, Commerce Bancshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KKR Co LP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, KKR Co reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commerce Bancshares and KKR Co

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

The idea behind Commerce Bancshares and KKR Co LP 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.