Correlation Between BancFirst and National Bank

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

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

Diversification Opportunities for BancFirst and National Bank

0.59

Correlation Coefficient

BancFirst  National Bank

Very weak diversification

The 3 months correlation between BancFirst and National is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BancFirst and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings and BancFirst 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 BancFirst are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of BancFirst i.e., BancFirst and National Bank go up and down completely randomly.

Pair Corralation between BancFirst and National Bank

Given the investment horizon of 90 days BancFirst is expected to generate 1.1 times more return on investment than National Bank. However, BancFirst is 1.1 times more volatile than National Bank Holdings. It trades about 0.08 of its potential returns per unit of risk. National Bank Holdings is currently generating about -0.11 per unit of risk. If you would invest  8,578  in BancFirst on January 30, 2024 and sell it today you would earn a total of  326.00  from holding BancFirst or generate 3.8% return on investment over 90 days.

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

BancFirst  vs.  National Bank Holdings

BancFirst

Risk-Adjusted Performance

0 of 100

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.

National Bank Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with BancFirst and National Bank

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

The idea behind BancFirst and National Bank Holdings 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.