Correlation Between CVB Financial and BancFirst

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

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

Diversification Opportunities for CVB Financial and BancFirst

0.97

Correlation Coefficient

CVB Financial  BancFirst

Almost no diversification

The 3 months correlation between CVB and BancFirst is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding CVB Financial and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst and CVB 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 CVB 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 CVB Financial i.e., CVB Financial and BancFirst go up and down completely randomly.

Pair Corralation between CVB Financial and BancFirst

Given the investment horizon of 90 days CVB Financial is expected to generate 1.05 times more return on investment than BancFirst. However, CVB Financial is 1.05 times more volatile than BancFirst. It trades about 0.17 of its potential returns per unit of risk. BancFirst is currently generating about 0.14 per unit of risk. If you would invest  1,754  in CVB Financial on September 4, 2024 and sell it today you would earn a total of  577.00  from holding CVB Financial or generate 32.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

CVB Financial  vs.  BancFirst

CVB Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVB Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental drivers, CVB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

BancFirst

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BancFirst are ranked lower than 11 (%) 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 CVB Financial and BancFirst

The main advantage of trading using opposite CVB Financial and BancFirst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVB 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 CVB 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .