Correlation Between BancFirst and AIB Group

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

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

Diversification Opportunities for BancFirst and AIB Group

-0.05

Correlation Coefficient

BancFirst  AIB Group

Good diversification

The 3 months correlation between BancFirst and AIB is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding BancFirst and AIB Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIB Group plc and BancFirst 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 BancFirst are associated (or correlated) with AIB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIB Group plc has no effect on the direction of BancFirst i.e., BancFirst and AIB Group go up and down completely randomly.

Pair Corralation between BancFirst and AIB Group

Given the investment horizon of 90 days BancFirst is expected to generate 1.26 times more return on investment than AIB Group. However, BancFirst is 1.26 times more volatile than AIB Group plc. It trades about -0.05 of its potential returns per unit of risk. AIB Group plc is currently generating about -0.19 per unit of risk. If you would invest  12,121  in BancFirst on September 21, 2024 and sell it today you would lose (260.00) from holding BancFirst or give up 2.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

BancFirst  vs.  AIB Group plc

BancFirst

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BancFirst are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, BancFirst may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AIB Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIB Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with BancFirst and AIB Group

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

The idea behind BancFirst and AIB Group plc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.