Correlation Between First Community and BEO Bancorp
Can any of the company-specific risk be diversified away by investing in both First Community 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 Community 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 Community and BEO Bancorp, you can compare the effects of market volatilities on First Community 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 Community with a short position of BEO Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and BEO Bancorp.
Diversification Opportunities for First Community and BEO Bancorp
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and BEO is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding First Community and BEO Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEO Bancorp and First Community 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 Community 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 Community i.e., First Community and BEO Bancorp go up and down completely randomly.
Pair Corralation between First Community and BEO Bancorp
Given the investment horizon of 90 days First Community is expected to under-perform the BEO Bancorp. But the pink sheet apears to be less risky and, when comparing its historical volatility, First Community is 1.12 times less risky than BEO Bancorp. The pink sheet trades about -0.01 of its potential returns per unit of risk. The BEO Bancorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,646 in BEO Bancorp on August 29, 2024 and sell it today you would earn a total of 2,949 from holding BEO Bancorp or generate 63.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.5% |
| Values | Daily Returns |
First Community vs. BEO Bancorp
Performance |
| Timeline |
| First Community |
| BEO Bancorp |
First Community and BEO Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Community and BEO Bancorp
The main advantage of trading using opposite First Community and BEO Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community 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.| First Community vs. CCSB Financial Corp | First Community vs. Delhi Bank Corp | First Community vs. BEO Bancorp | First Community vs. First Community Financial |
| BEO Bancorp vs. CCSB Financial Corp | BEO Bancorp vs. Delhi Bank Corp | BEO Bancorp vs. First Community Financial | BEO Bancorp vs. First Community |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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