Correlation Between Banc Of and BancFirst

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

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

Diversification Opportunities for Banc Of and BancFirst

0.73

Correlation Coefficient

Banc Of  BancFirst

Poor diversification

The 3 months correlation between Banc and BancFirst is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Banc of California and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst and Banc Of 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 Banc of California are associated (or correlated) with BancFirst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BancFirst has no effect on the direction of Banc Of i.e., Banc Of and BancFirst go up and down completely randomly.

Pair Corralation between Banc Of and BancFirst

Assuming the 90 days trading horizon Banc Of is expected to generate 4.09 times less return on investment than BancFirst. But when comparing it to its historical volatility, Banc of California is 4.27 times less risky than BancFirst. It trades about 0.14 of its potential returns per unit of risk. BancFirst is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  10,387  in BancFirst on August 31, 2024 and sell it today you would earn a total of  2,349  from holding BancFirst or generate 22.61% return on investment over 90 days.

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

Banc of California  vs.  BancFirst

Banc of California

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banc of California are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Banc Of is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BancFirst

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Banc Of and BancFirst

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

The idea behind Banc of California and BancFirst 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.