Correlation Between Eventide Gilead and Berkshire Focus

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

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

Diversification Opportunities for Eventide Gilead and Berkshire Focus

0.61

Correlation Coefficient

Eventide Gilead  Berkshire Focus

Poor diversification

The 3 months correlation between EVENTIDE and Berkshire is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Eventide Gilead Fund and Berkshire Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Focus and Eventide Gilead 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 Eventide Gilead Fund are associated (or correlated) with Berkshire Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Focus has no effect on the direction of Eventide Gilead i.e., Eventide Gilead and Berkshire Focus go up and down completely randomly.

Pair Corralation between Eventide Gilead and Berkshire Focus

Assuming the 90 days horizon Eventide Gilead Fund is expected to generate 0.43 times more return on investment than Berkshire Focus. However, Eventide Gilead Fund is 2.33 times less risky than Berkshire Focus. It trades about 0.19 of its potential returns per unit of risk. Berkshire Focus is currently generating about 0.05 per unit of risk. If you would invest  5,057  in Eventide Gilead Fund on October 22, 2024 and sell it today you would earn a total of  170.00  from holding Eventide Gilead Fund or generate 3.36% return on investment over 90 days.

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

Eventide Gilead Fund  vs.  Berkshire Focus

Eventide Gilead

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eventide Gilead Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Eventide Gilead is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Eventide Gilead and Berkshire Focus

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

The idea behind Eventide Gilead Fund and Berkshire Focus 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.