Correlation Between City Holding and BancFirst

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

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

Diversification Opportunities for City Holding and BancFirst

0.96

Correlation Coefficient

City Holding  BancFirst

Almost no diversification

The 3 months correlation between City and BancFirst is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding City Holding and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst and City Holding 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 City Holding are associated (or correlated) with BancFirst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BancFirst has no effect on the direction of City Holding i.e., City Holding and BancFirst go up and down completely randomly.

Pair Corralation between City Holding and BancFirst

Given the investment horizon of 90 days City Holding is expected to generate 1.25 times less return on investment than BancFirst. But when comparing it to its historical volatility, City Holding is 1.28 times less risky than BancFirst. It trades about 0.05 of its potential returns per unit of risk. BancFirst is currently generating about 0.05 of returns per unit of risk over similar time horizon. 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

City Holding  vs.  BancFirst

City Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in City Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, City Holding is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with City Holding and BancFirst

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

The idea behind City Holding and BancFirst 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.