Correlation Between Bancolombia and Berkshire Hills

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

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

Diversification Opportunities for Bancolombia and Berkshire Hills

0.18

Correlation Coefficient

Bancolombia  Berkshire Hills

Average diversification

The 3 months correlation between Bancolombia and Berkshire is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Bancolombia SA ADR 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 Bancolombia 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 Bancolombia SA ADR 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 Bancolombia i.e., Bancolombia and Berkshire Hills go up and down completely randomly.

Pair Corralation between Bancolombia and Berkshire Hills

Considering the 90-day investment horizon Bancolombia SA ADR is expected to generate 0.61 times more return on investment than Berkshire Hills. However, Bancolombia SA ADR is 1.63 times less risky than Berkshire Hills. It trades about 0.08 of its potential returns per unit of risk. Berkshire Hills Bancorp is currently generating about 0.04 per unit of risk. If you would invest  3,027  in Bancolombia SA ADR on October 23, 2024 and sell it today you would earn a total of  188.00  from holding Bancolombia SA ADR or generate 6.21% return on investment over 90 days.

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

Bancolombia SA ADR  vs.  Berkshire Hills Bancorp

Bancolombia SA ADR

Risk-Adjusted Performance

6 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bancolombia SA ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward indicators, Bancolombia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Berkshire Hills Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hills Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Berkshire Hills is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bancolombia and Berkshire Hills

The main advantage of trading using opposite Bancolombia and Berkshire Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bancolombia 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 Bancolombia SA ADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.