Correlation Between Truist Financial and BancFirst

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

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

Diversification Opportunities for Truist Financial and BancFirst

-0.55

Correlation Coefficient

Truist Financial  BancFirst

Excellent diversification

The 3 months correlation between Truist and BancFirst is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst and Truist 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 Truist Financial 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 Truist Financial i.e., Truist Financial and BancFirst go up and down completely randomly.

Pair Corralation between Truist Financial and BancFirst

Assuming the 90 days trading horizon Truist Financial is expected to under-perform the BancFirst. But the preferred stock apears to be less risky and, when comparing its historical volatility, Truist Financial is 2.81 times less risky than BancFirst. The preferred stock trades about -0.03 of its potential returns per unit of risk. The BancFirst is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  10,387  in BancFirst on August 31, 2024 and sell it today you would earn a total of  2,349  from holding BancFirst or generate 22.61% return on investment over 90 days.

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

Truist Financial  vs.  BancFirst

Truist Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 Truist Financial and BancFirst

The main advantage of trading using opposite Truist Financial and BancFirst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist Financial 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 Truist Financial 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.