Correlation Between BancFirst and First Financial

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

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

Diversification Opportunities for BancFirst and First Financial

0.25

Correlation Coefficient

BancFirst  First Financial

Modest diversification

The 3 months correlation between BancFirst and First is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding BancFirst and First Financial Northwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Northwest 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Northwest has no effect on the direction of BancFirst i.e., BancFirst and First Financial go up and down completely randomly.

Pair Corralation between BancFirst and First Financial

Given the investment horizon of 90 days BancFirst is expected to generate 2.21 times more return on investment than First Financial. However, BancFirst is 2.21 times more volatile than First Financial Northwest. It trades about 0.09 of its potential returns per unit of risk. First Financial Northwest is currently generating about 0.01 per unit of risk. If you would invest  8,465  in BancFirst on October 25, 2024 and sell it today you would earn a total of  3,606  from holding BancFirst or generate 42.6% return on investment over 90 days.

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

BancFirst  vs.  First Financial Northwest

BancFirst

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BancFirst are ranked lower than 7 (%) 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.

First Financial Northwest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Financial Northwest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with BancFirst and First Financial

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

The idea behind BancFirst and First Financial Northwest 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.