Correlation Between BancFirst and Live Oak

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

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

Diversification Opportunities for BancFirst and Live Oak

0.73

Correlation Coefficient

BancFirst  Live Oak

Poor diversification

The 3 months correlation between BancFirst and Live is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding BancFirst and Live Oak Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Oak 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 Live Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Oak Bancshares has no effect on the direction of BancFirst i.e., BancFirst and Live Oak go up and down completely randomly.

Pair Corralation between BancFirst and Live Oak

Given the investment horizon of 90 days BancFirst is expected to generate 0.82 times more return on investment than Live Oak. However, BancFirst is 1.22 times less risky than Live Oak. It trades about 0.09 of its potential returns per unit of risk. Live Oak Bancshares is currently generating about 0.03 per unit of risk. If you would invest  10,685  in BancFirst on October 25, 2024 and sell it today you would earn a total of  1,386  from holding BancFirst or generate 12.97% return on investment over 90 days.

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

BancFirst  vs.  Live Oak Bancshares

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.

Live Oak Bancshares

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Live Oak Bancshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Live Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BancFirst and Live Oak

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

The idea behind BancFirst and Live Oak 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.