Correlation Between BancFirst and First Bancorp

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

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

Diversification Opportunities for BancFirst and First Bancorp

0.89

Correlation Coefficient

BancFirst  First Bancorp

Very poor diversification

The 3 months correlation between BancFirst and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BancFirst and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp 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 First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of BancFirst i.e., BancFirst and First Bancorp go up and down completely randomly.

Pair Corralation between BancFirst and First Bancorp

Given the investment horizon of 90 days BancFirst is expected to under-perform the First Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, BancFirst is 1.08 times less risky than First Bancorp. The stock trades about -0.07 of its potential returns per unit of risk. The First Bancorp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,402  in First Bancorp on December 28, 2024 and sell it today you would lose (273.00) from holding First Bancorp or give up 6.2% of portfolio value over 90 days.

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

BancFirst  vs.  First Bancorp

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.

First Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First Bancorp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BancFirst and First Bancorp

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

The idea behind BancFirst and First Bancorp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.