Correlation Between BancFirst and Heritage Financial

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

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

Diversification Opportunities for BancFirst and Heritage Financial

0.97

Correlation Coefficient

BancFirst  Heritage Financial

Almost no diversification

The 3 months correlation between BancFirst and Heritage is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding BancFirst and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage 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 Heritage Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Financial has no effect on the direction of BancFirst i.e., BancFirst and Heritage Financial go up and down completely randomly.

Pair Corralation between BancFirst and Heritage Financial

Given the investment horizon of 90 days BancFirst is expected to generate 0.93 times more return on investment than Heritage Financial. However, BancFirst is 1.07 times less risky than Heritage Financial. It trades about 0.05 of its potential returns per unit of risk. Heritage Financial is currently generating about 0.0 per unit of risk. If you would invest  8,077  in BancFirst on September 28, 2024 and sell it today you would earn a total of  4,044  from holding BancFirst or generate 50.07% return on investment over 90 days.

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

BancFirst  vs.  Heritage Financial

BancFirst

Risk-Adjusted Performance

7 of 100

OK

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.

Heritage Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Heritage Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BancFirst and Heritage Financial

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

The idea behind BancFirst and Heritage 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.