Correlation Between BancFirst and Plumas Bancorp

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

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

Diversification Opportunities for BancFirst and Plumas Bancorp

0.95

Correlation Coefficient

BancFirst  Plumas Bancorp

Almost no diversification

The 3 months correlation between BancFirst and Plumas is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding BancFirst and Plumas Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumas 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 Plumas Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumas Bancorp has no effect on the direction of BancFirst i.e., BancFirst and Plumas Bancorp go up and down completely randomly.

Pair Corralation between BancFirst and Plumas Bancorp

Given the investment horizon of 90 days BancFirst is expected to under-perform the Plumas Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, BancFirst is 1.01 times less risky than Plumas Bancorp. The stock trades about -0.05 of its potential returns per unit of risk. The Plumas Bancorp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,649  in Plumas Bancorp on September 21, 2024 and sell it today you would lose (31.00) from holding Plumas Bancorp or give up 0.67% of portfolio value over 90 days.

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

BancFirst  vs.  Plumas Bancorp

BancFirst

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BancFirst are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, BancFirst may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Plumas Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Plumas Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Plumas Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BancFirst and Plumas Bancorp

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

The idea behind BancFirst and Plumas 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.