Correlation Between PHX Energy and Commerce Bancshares

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

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

Diversification Opportunities for PHX Energy and Commerce Bancshares

-0.23

Correlation Coefficient

PHX Energy  Commerce Bancshares

Very good diversification

The 3 months correlation between PHX and Commerce is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding PHX Energy Services and Commerce Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce Bancshares and PHX Energy 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 PHX Energy Services 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 PHX Energy i.e., PHX Energy and Commerce Bancshares go up and down completely randomly.

Pair Corralation between PHX Energy and Commerce Bancshares

Assuming the 90 days horizon PHX Energy Services is expected to generate 3.25 times more return on investment than Commerce Bancshares. However, PHX Energy is 3.25 times more volatile than Commerce Bancshares. It trades about 0.03 of its potential returns per unit of risk. Commerce Bancshares is currently generating about 0.02 per unit of risk. If you would invest  562.00  in PHX Energy Services on September 26, 2024 and sell it today you would earn a total of  78.00  from holding PHX Energy Services or generate 13.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.93%
Values	Daily Returns

PHX Energy Services  vs.  Commerce Bancshares

PHX Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

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

Commerce Bancshares

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commerce Bancshares are ranked lower than 7 (%) 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.

Pair Trading with PHX Energy and Commerce Bancshares

The main advantage of trading using opposite PHX Energy and Commerce Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PHX Energy 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 PHX Energy Services 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.