Correlation Between BancFirst and CullenFrost Bankers

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

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

Diversification Opportunities for BancFirst and CullenFrost Bankers

0.19

Correlation Coefficient

BancFirst  CullenFrost Bankers

Average diversification

The 3 months correlation between BancFirst and CullenFrost is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding BancFirst and CullenFrost Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CullenFrost Bankers 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 CullenFrost Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CullenFrost Bankers has no effect on the direction of BancFirst i.e., BancFirst and CullenFrost Bankers go up and down completely randomly.

Pair Corralation between BancFirst and CullenFrost Bankers

Given the investment horizon of 90 days BancFirst is expected to generate 1.01 times more return on investment than CullenFrost Bankers. However, BancFirst is 1.01 times more volatile than CullenFrost Bankers. It trades about 0.02 of its potential returns per unit of risk. CullenFrost Bankers is currently generating about 0.0 per unit of risk. If you would invest  8,079  in BancFirst on January 31, 2024 and sell it today you would earn a total of  790.00  from holding BancFirst or generate 9.78% return on investment over 90 days.

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

BancFirst  vs.  CullenFrost Bankers

BancFirst

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BancFirst are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

CullenFrost Bankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CullenFrost Bankers has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, CullenFrost Bankers is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with BancFirst and CullenFrost Bankers

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

The idea behind BancFirst and CullenFrost Bankers 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.