Correlation Between First Financial and Commerce Bancshares
Can any of the company-specific risk be diversified away by investing in both First Financial 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 First Financial and Commerce Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Financial and Commerce Bancshares, you can compare the effects of market volatilities on First Financial 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 First Financial with a short position of Commerce Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Commerce Bancshares.
Diversification Opportunities for First Financial and Commerce Bancshares
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Commerce is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Financial and Commerce Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce Bancshares and First Financial 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 First Financial 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 First Financial i.e., First Financial and Commerce Bancshares go up and down completely randomly.
Pair Corralation between First Financial and Commerce Bancshares
Given the investment horizon of 90 days First Financial is expected to generate 1.21 times less return on investment than Commerce Bancshares. In addition to that, First Financial is 1.29 times more volatile than Commerce Bancshares. It trades about 0.18 of its total potential returns per unit of risk. Commerce Bancshares is currently generating about 0.28 per unit of volatility. If you would invest 6,358 in Commerce Bancshares on August 31, 2024 and sell it today you would earn a total of 1,030 from holding Commerce Bancshares or generate 16.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial vs. Commerce Bancshares
Performance |
| Timeline |
| First Financial |
| Commerce Bancshares |
First Financial and Commerce Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Commerce Bancshares
The main advantage of trading using opposite First Financial and Commerce Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial 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.| First Financial vs. Chemung Financial Corp | First Financial vs. Citizens Northern Corp | First Financial vs. National Bankshares | First Financial vs. Fidelity DD Bancorp |
| Commerce Bancshares vs. BOK Financial | Commerce Bancshares vs. Texas Capital Bancshares | Commerce Bancshares vs. United Bankshares | Commerce Bancshares vs. Prosperity 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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