Correlation Between Northfield Bancorp and BancFirst

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

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

Diversification Opportunities for Northfield Bancorp and BancFirst

0.78

Correlation Coefficient

Northfield Bancorp  BancFirst

Poor diversification

The 3 months correlation between Northfield and BancFirst is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Northfield Bancorp and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst and Northfield Bancorp 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 Northfield Bancorp 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 Northfield Bancorp i.e., Northfield Bancorp and BancFirst go up and down completely randomly.

Pair Corralation between Northfield Bancorp and BancFirst

Given the investment horizon of 90 days Northfield Bancorp is expected to under-perform the BancFirst. In addition to that, Northfield Bancorp is 1.05 times more volatile than BancFirst. It trades about -0.13 of its total potential returns per unit of risk. BancFirst is currently generating about 0.04 per unit of volatility. If you would invest  11,976  in BancFirst on October 25, 2024 and sell it today you would earn a total of  95.00  from holding BancFirst or generate 0.79% return on investment over 90 days.

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

Northfield Bancorp  vs.  BancFirst

Northfield Bancorp

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northfield Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Northfield Bancorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

BancFirst

Risk-Adjusted Performance

7 of 100

Modest

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 Northfield Bancorp and BancFirst

The main advantage of trading using opposite Northfield Bancorp and BancFirst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northfield Bancorp 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 Northfield Bancorp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.