Correlation Between BancFirst and CVB Financial

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

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

Diversification Opportunities for BancFirst and CVB Financial

0.75

Correlation Coefficient

BancFirst  CVB Financial

Poor diversification

The 3 months correlation between BancFirst and CVB is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BancFirst and CVB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVB Financial 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 CVB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVB Financial has no effect on the direction of BancFirst i.e., BancFirst and CVB Financial go up and down completely randomly.

Pair Corralation between BancFirst and CVB Financial

Given the investment horizon of 90 days BancFirst is expected to generate 0.99 times more return on investment than CVB Financial. However, BancFirst is 1.01 times less risky than CVB Financial. It trades about -0.08 of its potential returns per unit of risk. CVB Financial is currently generating about -0.13 per unit of risk. If you would invest  11,916  in BancFirst on December 29, 2024 and sell it today you would lose (965.00) from holding BancFirst or give up 8.1% of portfolio value over 90 days.

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

BancFirst  vs.  CVB Financial

BancFirst

Risk-Adjusted Performance

Very Weak

Over the last 90 days BancFirst has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CVB Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVB Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BancFirst and CVB Financial

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

The idea behind BancFirst and CVB Financial 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.