Correlation Between BancFirst and Community West

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

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

Diversification Opportunities for BancFirst and Community West

0.82

Correlation Coefficient

BancFirst  Community West

Very poor diversification

The 3 months correlation between BancFirst and Community is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BancFirst and Community West Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community West Bancshares 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 Community West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community West Bancshares has no effect on the direction of BancFirst i.e., BancFirst and Community West go up and down completely randomly.

Pair Corralation between BancFirst and Community West

Given the investment horizon of 90 days BancFirst is expected to under-perform the Community West. In addition to that, BancFirst is 1.19 times more volatile than Community West Bancshares. It trades about -0.08 of its total potential returns per unit of risk. Community West Bancshares is currently generating about -0.09 per unit of volatility. If you would invest  1,933  in Community West Bancshares on December 22, 2024 and sell it today you would lose (133.00) from holding Community West Bancshares or give up 6.88% of portfolio value over 90 days.

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

BancFirst  vs.  Community West Bancshares

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.

Community West Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Community West Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with BancFirst and Community West

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

The idea behind BancFirst and Community West 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.