Correlation Between Community West and Berkshire Hills

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

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

Diversification Opportunities for Community West and Berkshire Hills

0.48

Correlation Coefficient

Community West  Berkshire Hills

Very weak diversification

The 3 months correlation between Community and Berkshire is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares 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 Community West 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 Community West Bancshares 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 Community West i.e., Community West and Berkshire Hills go up and down completely randomly.

Pair Corralation between Community West and Berkshire Hills

Given the investment horizon of 90 days Community West Bancshares is expected to generate 0.95 times more return on investment than Berkshire Hills. However, Community West Bancshares is 1.05 times less risky than Berkshire Hills. It trades about -0.05 of its potential returns per unit of risk. Berkshire Hills Bancorp is currently generating about -0.08 per unit of risk. If you would invest  1,925  in Community West Bancshares on December 31, 2024 and sell it today you would lose (85.00) from holding Community West Bancshares or give up 4.42% of portfolio value over 90 days.

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

Community West Bancshares  vs.  Berkshire Hills Bancorp

Community West Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Community West Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Community West is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Community West and Berkshire Hills

The main advantage of trading using opposite Community West and Berkshire Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West 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 Community West Bancshares 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.