Correlation Between BancFirst and First Financial

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

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

Diversification Opportunities for BancFirst and First Financial

0.68

Correlation Coefficient

BancFirst  First Financial

Poor diversification

The 3 months correlation between BancFirst and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding BancFirst and First Financial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bancorp 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Bancorp has no effect on the direction of BancFirst i.e., BancFirst and First Financial go up and down completely randomly.

Pair Corralation between BancFirst and First Financial

Given the investment horizon of 90 days BancFirst is expected to under-perform the First Financial. In addition to that, BancFirst is 1.1 times more volatile than First Financial Bancorp. It trades about -0.02 of its total potential returns per unit of risk. First Financial Bancorp is currently generating about 0.02 per unit of volatility. If you would invest  2,550  in First Financial Bancorp on July 10, 2025 and sell it today you would earn a total of  35.00  from holding First Financial Bancorp or generate 1.37% return on investment over 90 days.

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

BancFirst  vs.  First Financial Bancorp

BancFirst

Risk-Adjusted Performance

Weakest

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.

First Financial Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Financial Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, First Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BancFirst and First Financial

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

The idea behind BancFirst and First Financial Bancorp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.