Correlation Between National Capital and Berkshire Hills

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

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

Diversification Opportunities for National Capital and Berkshire Hills

-0.16

Correlation Coefficient

National Capital  Berkshire Hills

Good diversification

The 3 months correlation between National and Berkshire is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding National Capital Bank 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 National Capital 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 National Capital Bank 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 National Capital i.e., National Capital and Berkshire Hills go up and down completely randomly.

Pair Corralation between National Capital and Berkshire Hills

Given the investment horizon of 90 days National Capital Bank is expected to generate 39.57 times more return on investment than Berkshire Hills. However, National Capital is 39.57 times more volatile than Berkshire Hills Bancorp. It trades about 0.21 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  18,500  in National Capital Bank on October 23, 2024 and sell it today you would lose (12,200) from holding National Capital Bank or give up 65.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

National Capital Bank  vs.  Berkshire Hills Bancorp

National Capital Bank

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Capital Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, National Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

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 National Capital and Berkshire Hills

The main advantage of trading using opposite National Capital and Berkshire Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Capital 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 National Capital Bank 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..