Correlation Between Commerce Bancshares and SSC Security

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

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

Diversification Opportunities for Commerce Bancshares and SSC Security

0.66

Correlation Coefficient

Commerce Bancshares  SSC Security

Poor diversification

The 3 months correlation between Commerce and SSC is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Commerce Bancshares and SSC Security Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSC Security Services 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 SSC Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSC Security Services has no effect on the direction of Commerce Bancshares i.e., Commerce Bancshares and SSC Security go up and down completely randomly.

Pair Corralation between Commerce Bancshares and SSC Security

Given the investment horizon of 90 days Commerce Bancshares is expected to generate 1.0 times less return on investment than SSC Security. But when comparing it to its historical volatility, Commerce Bancshares is 3.88 times less risky than SSC Security. It trades about 0.09 of its potential returns per unit of risk. SSC Security Services is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  185.00  in SSC Security Services on September 24, 2024 and sell it today you would lose (4.00) from holding SSC Security Services or give up 2.16% of portfolio value over 90 days.

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

Commerce Bancshares  vs.  SSC Security Services

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.

SSC Security Services

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Commerce Bancshares and SSC Security

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

The idea behind Commerce Bancshares and SSC Security Services 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.