Correlation Between Financial Institutions and BOK Financial

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

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

Diversification Opportunities for Financial Institutions and BOK Financial

0.64

Correlation Coefficient

Financial Institutions  BOK Financial

Poor diversification

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

Pair Corralation between Financial Institutions and BOK Financial

Given the investment horizon of 90 days Financial Institutions is expected to under-perform the BOK Financial. In addition to that, Financial Institutions is 1.04 times more volatile than BOK Financial. It trades about -0.06 of its total potential returns per unit of risk. BOK Financial is currently generating about -0.03 per unit of volatility. If you would invest  10,677  in BOK Financial on December 29, 2024 and sell it today you would lose (313.00) from holding BOK Financial or give up 2.93% of portfolio value over 90 days.

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

Financial Institutions  vs.  BOK Financial

Financial Institutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Financial Institutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Financial Institutions is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with Financial Institutions and BOK Financial

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

The idea behind Financial Institutions and BOK Financial 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.