Correlation Between Columbia Banking and BancFirst

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

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

Diversification Opportunities for Columbia Banking and BancFirst

0.93

Correlation Coefficient

Columbia Banking  BancFirst

Almost no diversification

The 3 months correlation between Columbia and BancFirst is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Banking System and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst and Columbia Banking 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 Columbia Banking System 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 Columbia Banking i.e., Columbia Banking and BancFirst go up and down completely randomly.

Pair Corralation between Columbia Banking and BancFirst

Given the investment horizon of 90 days Columbia Banking System is expected to generate 0.89 times more return on investment than BancFirst. However, Columbia Banking System is 1.13 times less risky than BancFirst. It trades about 0.17 of its potential returns per unit of risk. BancFirst is currently generating about 0.14 per unit of risk. If you would invest  2,328  in Columbia Banking System on September 12, 2024 and sell it today you would earn a total of  624.00  from holding Columbia Banking System or generate 26.8% return on investment over 90 days.

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

Columbia Banking System  vs.  BancFirst

Columbia Banking System

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Banking System are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent essential indicators, Columbia Banking sustained solid returns over the last few months and may actually be approaching a breakup point.

BancFirst

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BancFirst are ranked lower than 10 (%) 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 Columbia Banking and BancFirst

The main advantage of trading using opposite Columbia Banking and BancFirst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Banking 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 Columbia Banking System 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.