Correlation Between Bank of Marin and Commerce Bancshares

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

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

Diversification Opportunities for Bank of Marin and Commerce Bancshares

0.94

Correlation Coefficient

Bank of Marin  Commerce Bancshares

Almost no diversification

The 3 months correlation between Bank and Commerce is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Marin and Commerce Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce Bancshares and Bank of Marin 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 Bank of Marin 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 Bank of Marin i.e., Bank of Marin and Commerce Bancshares go up and down completely randomly.

Pair Corralation between Bank of Marin and Commerce Bancshares

Given the investment horizon of 90 days Bank of Marin is expected to under-perform the Commerce Bancshares. In addition to that, Bank of Marin is 1.63 times more volatile than Commerce Bancshares. It trades about 0.0 of its total potential returns per unit of risk. Commerce Bancshares is currently generating about 0.02 per unit of volatility. If you would invest  6,455  in Commerce Bancshares on September 3, 2024 and sell it today you would earn a total of  920.00  from holding Commerce Bancshares or generate 14.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Bank of Marin  vs.  Commerce Bancshares

Bank of Marin

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Marin are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of Marin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Commerce Bancshares

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commerce Bancshares are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Commerce Bancshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Marin and Commerce Bancshares

The main advantage of trading using opposite Bank of Marin and Commerce Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Marin 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 Bank of Marin 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.