Correlation Between Ford and Berkshire Hills
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Berkshire Hills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Berkshire Hills Bancorp, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Berkshire Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Berkshire Hills.
Diversification Opportunities for Ford and Berkshire Hills
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and Berkshire is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Berkshire Hills go up and down completely randomly.
Pair Corralation between Ford and Berkshire Hills
Taking into account the 90-day investment horizon Ford is expected to generate 5.82 times less return on investment than Berkshire Hills. But when comparing it to its historical volatility, Ford Motor is 1.22 times less risky than Berkshire Hills. It trades about 0.04 of its potential returns per unit of risk. Berkshire Hills Bancorp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,759 in Berkshire Hills Bancorp on August 28, 2024 and sell it today you would earn a total of 373.00 from holding Berkshire Hills Bancorp or generate 13.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Berkshire Hills Bancorp
Performance |
| Timeline |
| Ford Motor |
| Berkshire Hills Bancorp |
Ford and Berkshire Hills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Berkshire Hills
The main advantage of trading using opposite Ford and Berkshire Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| Berkshire Hills vs. Finward Bancorp | Berkshire Hills vs. Community West Bancshares | Berkshire Hills vs. First Community | Berkshire Hills vs. First Capital |
Check out your portfolio center.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.
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