Correlation Between BEO Bancorp and Bank of Idaho

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

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

Diversification Opportunities for BEO Bancorp and Bank of Idaho

0.53

Correlation Coefficient

BEO Bancorp  Bank of Idaho

Very weak diversification

The 3 months correlation between BEO and Bank is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding BEO Bancorp and Bank of Idaho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Idaho and BEO Bancorp 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 BEO Bancorp are associated (or correlated) with Bank of Idaho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Idaho has no effect on the direction of BEO Bancorp i.e., BEO Bancorp and Bank of Idaho go up and down completely randomly.

Pair Corralation between BEO Bancorp and Bank of Idaho

Given the investment horizon of 90 days BEO Bancorp is expected to generate 1.9 times more return on investment than Bank of Idaho. However, BEO Bancorp is 1.9 times more volatile than Bank of Idaho. It trades about 0.12 of its potential returns per unit of risk. Bank of Idaho is currently generating about 0.16 per unit of risk. If you would invest  6,102  in BEO Bancorp on September 27, 2024 and sell it today you would earn a total of  1,523  from holding BEO Bancorp or generate 24.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.81%
Values	Daily Returns

BEO Bancorp  vs.  Bank of Idaho

BEO Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BEO Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, BEO Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bank of Idaho

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Idaho are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Bank of Idaho may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BEO Bancorp and Bank of Idaho

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

The idea behind BEO Bancorp and Bank of Idaho 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.