Correlation Between Banco De and Berkshire Hills

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

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

Diversification Opportunities for Banco De and Berkshire Hills

-0.32

Correlation Coefficient

Banco De  Berkshire Hills

Very good diversification

The 3 months correlation between Banco and Berkshire is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Banco De Chile 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 Banco De 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 Banco De Chile 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 Banco De i.e., Banco De and Berkshire Hills go up and down completely randomly.

Pair Corralation between Banco De and Berkshire Hills

Considering the 90-day investment horizon Banco De Chile is expected to generate 0.86 times more return on investment than Berkshire Hills. However, Banco De Chile is 1.16 times less risky than Berkshire Hills. It trades about 0.31 of its potential returns per unit of risk. Berkshire Hills Bancorp is currently generating about -0.09 per unit of risk. If you would invest  2,256  in Banco De Chile on December 21, 2024 and sell it today you would earn a total of  529.00  from holding Banco De Chile or generate 23.45% return on investment over 90 days.

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

Banco De Chile  vs.  Berkshire Hills Bancorp

Banco De Chile

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco De Chile are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Banco De demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Berkshire Hills Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Berkshire Hills Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Banco De and Berkshire Hills

The main advantage of trading using opposite Banco De and Berkshire Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco De 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 Banco De Chile 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.