Correlation Between Commerce Bancshares and HMN Financial
Can any of the company-specific risk be diversified away by investing in both Commerce Bancshares and HMN 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 HMN 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 HMN Financial, you can compare the effects of market volatilities on Commerce Bancshares and HMN 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 HMN Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commerce Bancshares and HMN Financial.
Diversification Opportunities for Commerce Bancshares and HMN Financial
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Commerce and HMN is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Commerce Bancshares and HMN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMN Financial 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 HMN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMN Financial has no effect on the direction of Commerce Bancshares i.e., Commerce Bancshares and HMN Financial go up and down completely randomly.
Pair Corralation between Commerce Bancshares and HMN Financial
Given the investment horizon of 90 days Commerce Bancshares is expected to generate 0.99 times more return on investment than HMN Financial. However, Commerce Bancshares is 1.01 times less risky than HMN Financial. It trades about 0.25 of its potential returns per unit of risk. HMN Financial is currently generating about -0.2 per unit of risk. If you would invest 5,228 in Commerce Bancshares on February 3, 2024 and sell it today you would earn a total of 382.00 from holding Commerce Bancshares or generate 7.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Commerce Bancshares vs. HMN Financial
Performance |
Timeline |
Commerce Bancshares |
HMN Financial |
Commerce Bancshares and HMN Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Commerce Bancshares and HMN Financial
The main advantage of trading using opposite Commerce Bancshares and HMN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commerce Bancshares position performs unexpectedly, HMN 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 HMN Financial will offset losses from the drop in HMN Financial's long position.Commerce Bancshares vs. Barclays PLC ADR | Commerce Bancshares vs. UBS Group AG | Commerce Bancshares vs. ING Group NV | Commerce Bancshares vs. Citigroup |
HMN Financial vs. National Bank Holdings | HMN Financial vs. Community West Bancshares | HMN Financial vs. First Capital | HMN Financial vs. BCB Bancorp |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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