Correlation Between First Bankers and BEO Bancorp

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

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

Diversification Opportunities for First Bankers and BEO Bancorp

0.68

Correlation Coefficient

First Bankers  BEO Bancorp

Poor diversification

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

Pair Corralation between First Bankers and BEO Bancorp

Given the investment horizon of 90 days First Bankers Trustshares is expected to under-perform the BEO Bancorp. In addition to that, First Bankers is 1.47 times more volatile than BEO Bancorp. It trades about -0.01 of its total potential returns per unit of risk. BEO Bancorp is currently generating about 0.1 per unit of volatility. If you would invest  5,431  in BEO Bancorp on October 5, 2024 and sell it today you would earn a total of  2,265  from holding BEO Bancorp or generate 41.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	87.85%
Values	Daily Returns

First Bankers Trustshares  vs.  BEO Bancorp

First Bankers Trustshares

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Bankers Trustshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First Bankers is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

BEO Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BEO Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, BEO Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with First Bankers and BEO Bancorp

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

The idea behind First Bankers Trustshares and BEO 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.