Correlation Between SBM OFFSHORE and Commerce Bancshares

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

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

Diversification Opportunities for SBM OFFSHORE and Commerce Bancshares

0.43

Correlation Coefficient

SBM OFFSHORE  Commerce Bancshares

Very weak diversification

The 3 months correlation between SBM and Commerce is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE and Commerce Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce Bancshares and SBM OFFSHORE 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 SBM OFFSHORE 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 SBM OFFSHORE i.e., SBM OFFSHORE and Commerce Bancshares go up and down completely randomly.

Pair Corralation between SBM OFFSHORE and Commerce Bancshares

Assuming the 90 days trading horizon SBM OFFSHORE is expected to under-perform the Commerce Bancshares. But the stock apears to be less risky and, when comparing its historical volatility, SBM OFFSHORE is 1.6 times less risky than Commerce Bancshares. The stock trades about -0.24 of its potential returns per unit of risk. The Commerce Bancshares is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  6,450  in Commerce Bancshares on September 21, 2024 and sell it today you would lose (100.00) from holding Commerce Bancshares or give up 1.55% of portfolio value over 90 days.

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

SBM OFFSHORE  vs.  Commerce Bancshares

SBM OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBM OFFSHORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SBM OFFSHORE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Commerce Bancshares

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commerce Bancshares are ranked lower than 10 (%) 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.

Pair Trading with SBM OFFSHORE and Commerce Bancshares

The main advantage of trading using opposite SBM OFFSHORE and Commerce Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE 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 SBM OFFSHORE 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 CEOs Directory module to screen CEOs from public companies around the world.