Correlation Between Berkshire Focus and Health Care

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

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

Diversification Opportunities for Berkshire Focus and Health Care

-0.43

Correlation Coefficient

Berkshire Focus  Health Care

Very good diversification

The 3 months correlation between Berkshire and Health is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Focus and Health Care Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Services and Berkshire Focus 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 Focus are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Services has no effect on the direction of Berkshire Focus i.e., Berkshire Focus and Health Care go up and down completely randomly.

Pair Corralation between Berkshire Focus and Health Care

Assuming the 90 days horizon Berkshire Focus is expected to generate 0.89 times more return on investment than Health Care. However, Berkshire Focus is 1.13 times less risky than Health Care. It trades about 0.05 of its potential returns per unit of risk. Health Care Services is currently generating about -0.11 per unit of risk. If you would invest  3,142  in Berkshire Focus on October 22, 2024 and sell it today you would earn a total of  46.00  from holding Berkshire Focus or generate 1.46% return on investment over 90 days.

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

Berkshire Focus  vs.  Health Care Services

Berkshire Focus

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Focus are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Berkshire Focus showed solid returns over the last few months and may actually be approaching a breakup point.

Health Care Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Care Services has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Berkshire Focus and Health Care

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

The idea behind Berkshire Focus and Health Care Services 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.