Correlation Between Berkshire Focus and Firsthand Technology

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

By analyzing existing cross correlation between Berkshire Focus and Firsthand Technology Opportunities, you can compare the effects of market volatilities on Berkshire Focus and Firsthand Technology 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 Firsthand Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Focus and Firsthand Technology.

Diversification Opportunities for Berkshire Focus and Firsthand Technology

0.75

Correlation Coefficient

Berkshire Focus  Firsthand Technology

Poor diversification

The 3 months correlation between Berkshire and Firsthand is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Focus and Firsthand Technology Opportuni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firsthand Technology 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 Firsthand Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firsthand Technology has no effect on the direction of Berkshire Focus i.e., Berkshire Focus and Firsthand Technology go up and down completely randomly.

Pair Corralation between Berkshire Focus and Firsthand Technology

Assuming the 90 days horizon Berkshire Focus is expected to under-perform the Firsthand Technology. In addition to that, Berkshire Focus is 1.43 times more volatile than Firsthand Technology Opportunities. It trades about -0.03 of its total potential returns per unit of risk. Firsthand Technology Opportunities is currently generating about -0.01 per unit of volatility. If you would invest  406.00  in Firsthand Technology Opportunities on December 1, 2024 and sell it today you would lose (9.00) from holding Firsthand Technology Opportunities or give up 2.22% of portfolio value over 90 days.

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

Berkshire Focus  vs.  Firsthand Technology Opportuni

Berkshire Focus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Berkshire Focus has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Berkshire Focus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Firsthand Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Firsthand Technology Opportunities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Firsthand Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Berkshire Focus and Firsthand Technology

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

The idea behind Berkshire Focus and Firsthand Technology Opportunities 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.