Correlation Between Security Federal and BEO Bancorp

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

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

Diversification Opportunities for Security Federal and BEO Bancorp

0.33

Correlation Coefficient

Security Federal  BEO Bancorp

Weak diversification

The 3 months correlation between Security and BEO is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Security Federal and BEO Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEO Bancorp and Security Federal 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 Security Federal 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 Security Federal i.e., Security Federal and BEO Bancorp go up and down completely randomly.

Pair Corralation between Security Federal and BEO Bancorp

Given the investment horizon of 90 days Security Federal is expected to generate 11.17 times less return on investment than BEO Bancorp. But when comparing it to its historical volatility, Security Federal is 1.23 times less risky than BEO Bancorp. It trades about 0.01 of its potential returns per unit of risk. BEO Bancorp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,326  in BEO Bancorp on October 7, 2024 and sell it today you would earn a total of  370.00  from holding BEO Bancorp or generate 5.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.56%
Values	Daily Returns

Security Federal  vs.  BEO Bancorp

Security Federal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Security Federal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Security Federal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional 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 unsteady basic indicators, BEO Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Security Federal and BEO Bancorp

The main advantage of trading using opposite Security Federal and BEO Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Security Federal 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 Security Federal 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.