Correlation Between Commerce Bancshares and MSCI ACWI

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

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

Diversification Opportunities for Commerce Bancshares and MSCI ACWI

0.89

Correlation Coefficient

Commerce Bancshares  MSCI ACWI

Very poor diversification

The 3 months correlation between Commerce and MSCI is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Commerce Bancshares and MSCI ACWI exAUCONSUMER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSCI ACWI exAUCONSUMER 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 MSCI ACWI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSCI ACWI exAUCONSUMER has no effect on the direction of Commerce Bancshares i.e., Commerce Bancshares and MSCI ACWI go up and down completely randomly.

Pair Corralation between Commerce Bancshares and MSCI ACWI

Given the investment horizon of 90 days Commerce Bancshares is expected to under-perform the MSCI ACWI. In addition to that, Commerce Bancshares is 3.66 times more volatile than MSCI ACWI exAUCONSUMER. It trades about -0.52 of its total potential returns per unit of risk. MSCI ACWI exAUCONSUMER is currently generating about -0.07 per unit of volatility. If you would invest  2,497  in MSCI ACWI exAUCONSUMER on September 24, 2024 and sell it today you would lose (10.00) from holding MSCI ACWI exAUCONSUMER or give up 0.4% of portfolio value over 90 days.

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

Commerce Bancshares  vs.  MSCI ACWI exAUCONSUMER

Commerce Bancshares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Commerce Bancshares are ranked lower than 6 (%) 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.

MSCI ACWI exAUCONSUMER

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI ACWI exAUCONSUMER are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, MSCI ACWI is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Commerce Bancshares and MSCI ACWI

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

The idea behind Commerce Bancshares and MSCI ACWI exAUCONSUMER 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.