Correlation Between BancFirst and First Commonwealth

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

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

Diversification Opportunities for BancFirst and First Commonwealth

0.96

Correlation Coefficient

BancFirst  First Commonwealth

Almost no diversification

The 3 months correlation between BancFirst and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding BancFirst and First Commonwealth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Commonwealth 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 First Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Commonwealth has no effect on the direction of BancFirst i.e., BancFirst and First Commonwealth go up and down completely randomly.

Pair Corralation between BancFirst and First Commonwealth

Given the investment horizon of 90 days BancFirst is expected to generate 1.14 times more return on investment than First Commonwealth. However, BancFirst is 1.14 times more volatile than First Commonwealth Financial. It trades about 0.19 of its potential returns per unit of risk. First Commonwealth Financial is currently generating about -0.13 per unit of risk. If you would invest  12,162  in BancFirst on September 18, 2024 and sell it today you would earn a total of  565.00  from holding BancFirst or generate 4.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

BancFirst  vs.  First Commonwealth Financial

BancFirst

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BancFirst are ranked lower than 9 (%) 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.

First Commonwealth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Commonwealth Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, First Commonwealth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BancFirst and First Commonwealth

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

The idea behind BancFirst and First Commonwealth Financial 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.