Correlation Between First Horizon and BancFirst

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

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

Diversification Opportunities for First Horizon and BancFirst

0.05

Correlation Coefficient

First Horizon  BancFirst

Significant diversification

The 3 months correlation between First and BancFirst is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon National and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst and First Horizon 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 First Horizon National 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 First Horizon i.e., First Horizon and BancFirst go up and down completely randomly.

Pair Corralation between First Horizon and BancFirst

Considering the 90-day investment horizon First Horizon is expected to generate 6.7 times less return on investment than BancFirst. But when comparing it to its historical volatility, First Horizon National is 1.43 times less risky than BancFirst. It trades about 0.03 of its potential returns per unit of risk. BancFirst is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  8,480  in BancFirst on January 26, 2024 and sell it today you would earn a total of  677.00  from holding BancFirst or generate 7.98% return on investment over 90 days.

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

First Horizon National  vs.  BancFirst

First Horizon National

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon National are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, First Horizon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with First Horizon and BancFirst

The main advantage of trading using opposite First Horizon and BancFirst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Horizon 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 First Horizon National 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.