Correlation Between HTBI Old and Commerce Bancshares

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

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

Diversification Opportunities for HTBI Old and Commerce Bancshares

-0.71

Correlation Coefficient

HTBI Old  Commerce Bancshares

Pay attention - limited upside

The 3 months correlation between HTBI and Commerce is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding HTBI Old and Commerce Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce Bancshares and HTBI Old 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 HTBI Old 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 HTBI Old i.e., HTBI Old and Commerce Bancshares go up and down completely randomly.

Pair Corralation between HTBI Old and Commerce Bancshares

Given the investment horizon of 90 days HTBI Old is expected to generate 1.28 times more return on investment than Commerce Bancshares. However, HTBI Old is 1.28 times more volatile than Commerce Bancshares. It trades about 0.14 of its potential returns per unit of risk. Commerce Bancshares is currently generating about -0.01 per unit of risk. If you would invest  3,372  in HTBI Old on December 30, 2024 and sell it today you would earn a total of  283.00  from holding HTBI Old or generate 8.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	59.68%
Values	Daily Returns

HTBI Old  vs.  Commerce Bancshares

HTBI Old

Risk-Adjusted Performance

OK

Over the last 90 days HTBI Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly fragile fundamental drivers, HTBI Old demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Commerce Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Commerce Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Commerce Bancshares is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with HTBI Old and Commerce Bancshares

The main advantage of trading using opposite HTBI Old and Commerce Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HTBI Old 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 HTBI Old 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.