Correlation Between BEO Bancorp and First Reliance

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

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

Diversification Opportunities for BEO Bancorp and First Reliance

0.42

Correlation Coefficient

BEO Bancorp  First Reliance

Very weak diversification

The 3 months correlation between BEO and First is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding BEO Bancorp and First Reliance Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Reliance Bancshares 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 First Reliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Reliance Bancshares has no effect on the direction of BEO Bancorp i.e., BEO Bancorp and First Reliance go up and down completely randomly.

Pair Corralation between BEO Bancorp and First Reliance

Given the investment horizon of 90 days BEO Bancorp is expected to generate 1.56 times more return on investment than First Reliance. However, BEO Bancorp is 1.56 times more volatile than First Reliance Bancshares. It trades about 0.14 of its potential returns per unit of risk. First Reliance Bancshares is currently generating about 0.08 per unit of risk. If you would invest  8,000  in BEO Bancorp on May 2, 2025 and sell it today you would earn a total of  1,200  from holding BEO Bancorp or generate 15.0% return on investment over 90 days.

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

BEO Bancorp  vs.  First Reliance Bancshares

BEO Bancorp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BEO Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, BEO Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

First Reliance Bancshares

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Reliance Bancshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, First Reliance is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with BEO Bancorp and First Reliance

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

The idea behind BEO Bancorp and First Reliance 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.