Correlation Between Berkshire Hathaway and Bellevue Healthcare

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

By analyzing existing cross correlation between Berkshire Hathaway and Bellevue Healthcare Trust, you can compare the effects of market volatilities on Berkshire Hathaway and Bellevue Healthcare 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 Berkshire Hathaway with a short position of Bellevue Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Bellevue Healthcare.

Diversification Opportunities for Berkshire Hathaway and Bellevue Healthcare

-0.37

Correlation Coefficient

Berkshire Hathaway  Bellevue Healthcare

Very good diversification

The 3 months correlation between Berkshire and Bellevue is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Bellevue Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellevue Healthcare Trust and Berkshire Hathaway 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 Berkshire Hathaway are associated (or correlated) with Bellevue Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellevue Healthcare Trust has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Bellevue Healthcare go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Bellevue Healthcare

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 1.45 times less return on investment than Bellevue Healthcare. But when comparing it to its historical volatility, Berkshire Hathaway is 1.13 times less risky than Bellevue Healthcare. It trades about 0.03 of its potential returns per unit of risk. Bellevue Healthcare Trust is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  14,360  in Bellevue Healthcare Trust on October 22, 2024 and sell it today you would earn a total of  360.00  from holding Bellevue Healthcare Trust or generate 2.51% return on investment over 90 days.

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

Berkshire Hathaway  vs.  Bellevue Healthcare Trust

Berkshire Hathaway

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Bellevue Healthcare Trust

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bellevue Healthcare Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Bellevue Healthcare is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Berkshire Hathaway and Bellevue Healthcare

The main advantage of trading using opposite Berkshire Hathaway and Bellevue Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Bellevue Healthcare 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 Bellevue Healthcare will offset losses from the drop in Bellevue Healthcare's long position.

The idea behind Berkshire Hathaway and Bellevue Healthcare Trust 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.