Correlation Between BEO Bancorp and Elmer Bancorp

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

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

Diversification Opportunities for BEO Bancorp and Elmer Bancorp

0.76

Correlation Coefficient

BEO Bancorp  Elmer Bancorp

Poor diversification

The 3 months correlation between BEO and Elmer is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding BEO Bancorp and Elmer Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elmer Bancorp 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 Elmer Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elmer Bancorp has no effect on the direction of BEO Bancorp i.e., BEO Bancorp and Elmer Bancorp go up and down completely randomly.

Pair Corralation between BEO Bancorp and Elmer Bancorp

Given the investment horizon of 90 days BEO Bancorp is expected to generate 2.12 times more return on investment than Elmer Bancorp. However, BEO Bancorp is 2.12 times more volatile than Elmer Bancorp. It trades about 0.07 of its potential returns per unit of risk. Elmer Bancorp is currently generating about 0.1 per unit of risk. If you would invest  7,467  in BEO Bancorp on October 15, 2024 and sell it today you would earn a total of  332.00  from holding BEO Bancorp or generate 4.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

BEO Bancorp  vs.  Elmer Bancorp

BEO Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BEO Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BEO Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Elmer Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elmer Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Elmer Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BEO Bancorp and Elmer Bancorp

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

The idea behind BEO Bancorp and Elmer 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.