Correlation Between Banc Of and Berkshire Hills

Can any of the company-specific risk be diversified away by investing in both Banc Of and Berkshire Hills 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 Banc Of and Berkshire Hills into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Banc Of and Berkshire Hills

0.78

Correlation Coefficient

Banc Of  Berkshire Hills

Poor diversification

The 3 months correlation between Banc and Berkshire is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Banc of California and Berkshire Hills Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hills Bancorp and Banc Of 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 Banc of California are associated (or correlated) with Berkshire Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Hills Bancorp has no effect on the direction of Banc Of i.e., Banc Of and Berkshire Hills go up and down completely randomly.

Pair Corralation between Banc Of and Berkshire Hills

Assuming the 90 days trading horizon Banc Of is expected to generate 4.93 times less return on investment than Berkshire Hills. But when comparing it to its historical volatility, Banc of California is 3.72 times less risky than Berkshire Hills. It trades about 0.09 of its potential returns per unit of risk. Berkshire Hills Bancorp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,617  in Berkshire Hills Bancorp on September 13, 2024 and sell it today you would earn a total of  444.00  from holding Berkshire Hills Bancorp or generate 16.97% return on investment over 90 days.

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

Banc of California  vs.  Berkshire Hills Bancorp

Banc of California

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banc of California are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Banc Of is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Berkshire Hills Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hills Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, Berkshire Hills sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banc Of and Berkshire Hills

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

The idea behind Banc of California and Berkshire Hills 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.