Correlation Between Virginia National and BancFirst

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

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

Diversification Opportunities for Virginia National and BancFirst

0.79

Correlation Coefficient

Virginia National  BancFirst

Poor diversification

The 3 months correlation between Virginia and BancFirst is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Virginia National Bankshares and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst and Virginia National 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 Virginia National Bankshares 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 Virginia National i.e., Virginia National and BancFirst go up and down completely randomly.

Pair Corralation between Virginia National and BancFirst

Given the investment horizon of 90 days Virginia National is expected to generate 3.19 times less return on investment than BancFirst. In addition to that, Virginia National is 1.09 times more volatile than BancFirst. It trades about 0.01 of its total potential returns per unit of risk. BancFirst is currently generating about 0.04 per unit of volatility. If you would invest  8,743  in BancFirst on November 20, 2024 and sell it today you would earn a total of  3,201  from holding BancFirst or generate 36.61% return on investment over 90 days.

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

Virginia National Bankshares  vs.  BancFirst

Virginia National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virginia National Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

BancFirst

Risk-Adjusted Performance

Very Weak

Over the last 90 days BancFirst has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BancFirst is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Virginia National and BancFirst

The main advantage of trading using opposite Virginia National and BancFirst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virginia National 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 Virginia National Bankshares 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.