Correlation Between BOK Financial and Home Bancorp

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

By analyzing existing cross correlation between BOK Financial and Home Bancorp, you can compare the effects of market volatilities on BOK Financial and Home 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 BOK Financial with a short position of Home Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOK Financial and Home Bancorp.

Diversification Opportunities for BOK Financial and Home Bancorp

0.64

Correlation Coefficient

BOK Financial  Home Bancorp

Poor diversification

The 3 months correlation between BOK and Home is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BOK Financial and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp and BOK Financial 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 BOK Financial are associated (or correlated) with Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of BOK Financial i.e., BOK Financial and Home Bancorp go up and down completely randomly.

Pair Corralation between BOK Financial and Home Bancorp

Given the investment horizon of 90 days BOK Financial is expected to under-perform the Home Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, BOK Financial is 1.22 times less risky than Home Bancorp. The stock trades about -0.03 of its potential returns per unit of risk. The Home Bancorp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,655  in Home Bancorp on December 26, 2024 and sell it today you would lose (49.00) from holding Home Bancorp or give up 1.05% of portfolio value over 90 days.

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

BOK Financial  vs.  Home Bancorp

BOK Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days BOK Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, BOK Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Home Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Home Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Home Bancorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with BOK Financial and Home Bancorp

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

The idea behind BOK Financial and Home 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.