Correlation Between Commerce Bancshares and First Financial
Can any of the company-specific risk be diversified away by investing in both Commerce Bancshares and First Financial 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 First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commerce Bancshares and First Financial Bankshares, you can compare the effects of market volatilities on Commerce Bancshares and First Financial 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 First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commerce Bancshares and First Financial.
Diversification Opportunities for Commerce Bancshares and First Financial
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Commerce and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Commerce Bancshares and First Financial Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bank 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 First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Bank has no effect on the direction of Commerce Bancshares i.e., Commerce Bancshares and First Financial go up and down completely randomly.
Pair Corralation between Commerce Bancshares and First Financial
Given the investment horizon of 90 days Commerce Bancshares is expected to generate 0.75 times more return on investment than First Financial. However, Commerce Bancshares is 1.33 times less risky than First Financial. It trades about 0.27 of its potential returns per unit of risk. First Financial Bankshares is currently generating about 0.15 per unit of risk. If you would invest 6,190 in Commerce Bancshares on August 24, 2024 and sell it today you would earn a total of 991.00 from holding Commerce Bancshares or generate 16.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commerce Bancshares vs. First Financial Bankshares
Performance |
| Timeline |
| Commerce Bancshares |
| First Financial Bank |
Commerce Bancshares and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commerce Bancshares and First Financial
The main advantage of trading using opposite Commerce Bancshares and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commerce Bancshares position performs unexpectedly, First Financial 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 First Financial will offset losses from the drop in First Financial's long position.| Commerce Bancshares vs. BOK Financial | Commerce Bancshares vs. Texas Capital Bancshares | Commerce Bancshares vs. United Bankshares | Commerce Bancshares vs. Prosperity Bancshares |
| First Financial vs. BOK Financial | First Financial vs. Auburn National Bancorporation | First Financial vs. Great Southern Bancorp | First Financial vs. First Guaranty Bancshares |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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