Correlation Between Advanced Medical and Berkshire Hathaway

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

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

Diversification Opportunities for Advanced Medical and Berkshire Hathaway

-0.23

Correlation Coefficient

Advanced Medical  Berkshire Hathaway

Very good diversification

The 3 months correlation between Advanced and Berkshire is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Advanced Medical 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 Advanced Medical Solutions are associated (or correlated) with Berkshire Hathaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Hathaway has no effect on the direction of Advanced Medical i.e., Advanced Medical and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Advanced Medical and Berkshire Hathaway

Assuming the 90 days trading horizon Advanced Medical Solutions is expected to under-perform the Berkshire Hathaway. In addition to that, Advanced Medical is 3.41 times more volatile than Berkshire Hathaway. It trades about -0.05 of its total potential returns per unit of risk. Berkshire Hathaway is currently generating about -0.01 per unit of volatility. If you would invest  45,500  in Berkshire Hathaway on September 24, 2024 and sell it today you would lose (375.00) from holding Berkshire Hathaway or give up 0.82% of portfolio value over 90 days.

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

Advanced Medical Solutions  vs.  Berkshire Hathaway

Advanced Medical Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Medical Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Berkshire Hathaway

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Berkshire Hathaway has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Advanced Medical and Berkshire Hathaway

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

The idea behind Advanced Medical Solutions and Berkshire Hathaway 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.