Correlation Between Bogota Financial and International Bancshares

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

By analyzing existing cross correlation between Bogota Financial Corp and International Bancshares, you can compare the effects of market volatilities on Bogota Financial and International Bancshares 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 Bogota Financial with a short position of International Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bogota Financial and International Bancshares.

Diversification Opportunities for Bogota Financial and International Bancshares

0.45

Correlation Coefficient

Bogota Financial  International Bancshares

Very weak diversification

The 3 months correlation between Bogota and International is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bogota Financial Corp and International Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Bancshares and Bogota Financial 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 Bogota Financial Corp are associated (or correlated) with International Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Bancshares has no effect on the direction of Bogota Financial i.e., Bogota Financial and International Bancshares go up and down completely randomly.

Pair Corralation between Bogota Financial and International Bancshares

Given the investment horizon of 90 days Bogota Financial Corp is expected to generate 1.0 times more return on investment than International Bancshares. However, Bogota Financial is 1.0 times more volatile than International Bancshares. It trades about 0.03 of its potential returns per unit of risk. International Bancshares is currently generating about 0.01 per unit of risk. If you would invest  753.00  in Bogota Financial Corp on December 30, 2024 and sell it today you would earn a total of  16.00  from holding Bogota Financial Corp or generate 2.12% return on investment over 90 days.

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

Bogota Financial Corp  vs.  International Bancshares

Bogota Financial Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bogota Financial Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Bogota Financial is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

International Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, International Bancshares is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bogota Financial and International Bancshares

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

The idea behind Bogota Financial Corp and International Bancshares 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.