Correlation Between Performance Food and Commerce Bancshares

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

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

Diversification Opportunities for Performance Food and Commerce Bancshares

0.88

Correlation Coefficient

Performance Food  Commerce Bancshares

Very poor diversification

The 3 months correlation between Performance and Commerce is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and Commerce Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce Bancshares and Performance Food 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 Performance Food Group 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 Performance Food i.e., Performance Food and Commerce Bancshares go up and down completely randomly.

Pair Corralation between Performance Food and Commerce Bancshares

Assuming the 90 days trading horizon Performance Food Group is expected to under-perform the Commerce Bancshares. In addition to that, Performance Food is 1.07 times more volatile than Commerce Bancshares. It trades about -0.16 of its total potential returns per unit of risk. Commerce Bancshares is currently generating about -0.05 per unit of volatility. If you would invest  6,073  in Commerce Bancshares on December 25, 2024 and sell it today you would lose (323.00) from holding Commerce Bancshares or give up 5.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Performance Food Group  vs.  Commerce Bancshares

Performance Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Performance Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 nearly stable basic indicators, Commerce Bancshares is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Performance Food and Commerce Bancshares

The main advantage of trading using opposite Performance Food and Commerce Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Performance Food 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 Performance Food Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.