Correlation Between Berkshire Hathaway and Allstar Health

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Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Allstar Health 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 Hathaway and Allstar Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and Allstar Health Brands, you can compare the effects of market volatilities on Berkshire Hathaway and Allstar Health 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 Hathaway with a short position of Allstar Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Allstar Health.

Diversification Opportunities for Berkshire Hathaway and Allstar Health

-0.43
  Correlation Coefficient

Very good diversification

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

Pair Corralation between Berkshire Hathaway and Allstar Health

Assuming the 90 days horizon Berkshire Hathaway is expected to generate 1.5 times less return on investment than Allstar Health. But when comparing it to its historical volatility, Berkshire Hathaway is 9.41 times less risky than Allstar Health. It trades about 0.13 of its potential returns per unit of risk. Allstar Health Brands is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  0.07  in Allstar Health Brands on August 28, 2024 and sell it today you would lose (0.02) from holding Allstar Health Brands or give up 28.57% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Berkshire Hathaway  vs.  Allstar Health Brands

 Performance 
       Timeline  
Berkshire Hathaway 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Allstar Health Brands 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Allstar Health Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allstar Health is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Berkshire Hathaway and Allstar Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Berkshire Hathaway and Allstar Health

The main advantage of trading using opposite Berkshire Hathaway and Allstar Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Allstar Health 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 Allstar Health will offset losses from the drop in Allstar Health's long position.
The idea behind Berkshire Hathaway and Allstar Health Brands 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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