Correlation Between Commerce Bancshares and SEI Investments

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

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

Diversification Opportunities for Commerce Bancshares and SEI Investments

0.47

Correlation Coefficient

Commerce Bancshares  SEI Investments

Very weak diversification

The 3 months correlation between Commerce and SEI is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Commerce Bancshares and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments 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 SEI Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Investments has no effect on the direction of Commerce Bancshares i.e., Commerce Bancshares and SEI Investments go up and down completely randomly.

Pair Corralation between Commerce Bancshares and SEI Investments

Given the investment horizon of 90 days Commerce Bancshares is expected to generate 1.34 times less return on investment than SEI Investments. In addition to that, Commerce Bancshares is 1.62 times more volatile than SEI Investments. It trades about 0.16 of its total potential returns per unit of risk. SEI Investments is currently generating about 0.34 per unit of volatility. If you would invest  6,628  in SEI Investments on August 12, 2024 and sell it today you would earn a total of  1,383  from holding SEI Investments or generate 20.87% return on investment over 90 days.

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

Commerce Bancshares  vs.  SEI Investments

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.

SEI Investments

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward indicators, SEI Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commerce Bancshares and SEI Investments

The main advantage of trading using opposite Commerce Bancshares and SEI Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commerce Bancshares position performs unexpectedly, SEI Investments 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 SEI Investments will offset losses from the drop in SEI Investments' long position.

The idea behind Commerce Bancshares and SEI Investments 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.