Apparently the derivation goes back to vaudeville and stereotypes about immigrants:

“Bozo” was in fact a personal name among immigrants to the United States from Serbian and Croatian regions. It seems likely that vaudeville’s Bozo originated from this immigrant name and stereotypes surrounding eastern Europeans (akin to the use of palooka to refer to an oafish boxer, probably related to the Polish name Paluka).

https://www.vocabulary.com/articles/wordroutes/where-does-bozo-come-from-lets-not-clown-around/