Correlation Between VersaBank and BancFirst

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

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

Diversification Opportunities for VersaBank and BancFirst

0.76

Correlation Coefficient

VersaBank  BancFirst

Poor diversification

The 3 months correlation between VersaBank and BancFirst is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst and VersaBank 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 VersaBank 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 VersaBank i.e., VersaBank and BancFirst go up and down completely randomly.

Pair Corralation between VersaBank and BancFirst

Given the investment horizon of 90 days VersaBank is expected to under-perform the BancFirst. In addition to that, VersaBank is 1.67 times more volatile than BancFirst. It trades about -0.13 of its total potential returns per unit of risk. BancFirst is currently generating about 0.0 per unit of volatility. If you would invest  12,074  in BancFirst on November 20, 2024 and sell it today you would lose (130.00) from holding BancFirst or give up 1.08% of portfolio value over 90 days.

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

VersaBank  vs.  BancFirst

VersaBank

Risk-Adjusted Performance

Very Weak

Over the last 90 days VersaBank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing 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 VersaBank and BancFirst

The main advantage of trading using opposite VersaBank and BancFirst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank 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 VersaBank 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.