Correlation Between CF Bankshares and BancFirst
Can any of the company-specific risk be diversified away by investing in both CF Bankshares 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 CF Bankshares and BancFirst into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CF Bankshares and BancFirst, you can compare the effects of market volatilities on CF Bankshares 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 CF Bankshares with a short position of BancFirst. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Bankshares and BancFirst.
Diversification Opportunities for CF Bankshares and BancFirst
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CFBK and BancFirst is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding CF Bankshares and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst and CF Bankshares 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 CF 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 CF Bankshares i.e., CF Bankshares and BancFirst go up and down completely randomly.
Pair Corralation between CF Bankshares and BancFirst
Given the investment horizon of 90 days CF Bankshares is expected to generate 1.91 times less return on investment than BancFirst. But when comparing it to its historical volatility, CF Bankshares is 1.39 times less risky than BancFirst. It trades about 0.14 of its potential returns per unit of risk. BancFirst is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 11,120 in BancFirst on August 27, 2024 and sell it today you would earn a total of 1,689 from holding BancFirst or generate 15.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CF Bankshares vs. BancFirst
Performance |
| Timeline |
| CF Bankshares |
| BancFirst |
CF Bankshares and BancFirst Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Bankshares and BancFirst
The main advantage of trading using opposite CF Bankshares and BancFirst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Bankshares 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.| CF Bankshares vs. Magyar Bancorp | CF Bankshares vs. Home Federal Bancorp | CF Bankshares vs. Community West Bancshares | CF Bankshares vs. First Financial Northwest |
| BancFirst vs. Glacier Bancorp | BancFirst vs. BOK Financial | BancFirst vs. First Financial Bancorp | BancFirst vs. First Bancorp |
Check out your portfolio center.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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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