Correlation Between Eventide Healthcare and Berkshire Focus

Can any of the company-specific risk be diversified away by investing in both Eventide Healthcare 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 Healthcare 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 Healthcare Life and Berkshire Focus, you can compare the effects of market volatilities on Eventide Healthcare 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 Healthcare with a short position of Berkshire Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eventide Healthcare and Berkshire Focus.

Diversification Opportunities for Eventide Healthcare and Berkshire Focus

-0.5

Correlation Coefficient

Eventide Healthcare  Berkshire Focus

Very good diversification

The 3 months correlation between Eventide and Berkshire is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Eventide Healthcare Life and Berkshire Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Focus and Eventide Healthcare 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 Healthcare Life 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 Healthcare i.e., Eventide Healthcare and Berkshire Focus go up and down completely randomly.

Pair Corralation between Eventide Healthcare and Berkshire Focus

Assuming the 90 days horizon Eventide Healthcare Life is expected to under-perform the Berkshire Focus. But the mutual fund apears to be less risky and, when comparing its historical volatility, Eventide Healthcare Life is 1.51 times less risky than Berkshire Focus. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Berkshire Focus is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,276  in Berkshire Focus on October 7, 2024 and sell it today you would lose (104.00) from holding Berkshire Focus or give up 3.17% of portfolio value over 90 days.

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

Eventide Healthcare Life  vs.  Berkshire Focus

Eventide Healthcare Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eventide Healthcare Life has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Eventide Healthcare 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

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Focus are ranked lower than 13 (%) 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 Healthcare and Berkshire Focus

The main advantage of trading using opposite Eventide Healthcare and Berkshire Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eventide Healthcare 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 Healthcare Life 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.