Correlation Between Berkshire Hathaway and Induction Healthcare

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

By analyzing existing cross correlation between Berkshire Hathaway and Induction Healthcare Group, you can compare the effects of market volatilities on Berkshire Hathaway and Induction Healthcare 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 Induction Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Induction Healthcare.

Diversification Opportunities for Berkshire Hathaway and Induction Healthcare

0.41

Correlation Coefficient

Berkshire Hathaway  Induction Healthcare

Very weak diversification

The 3 months correlation between Berkshire and Induction is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Induction Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Induction Healthcare 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 Induction Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Induction Healthcare has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Induction Healthcare go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Induction Healthcare

Assuming the 90 days trading horizon Berkshire Hathaway is expected to under-perform the Induction Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Berkshire Hathaway is 3.72 times less risky than Induction Healthcare. The stock trades about -0.01 of its potential returns per unit of risk. The Induction Healthcare Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  750.00  in Induction Healthcare Group on September 24, 2024 and sell it today you would earn a total of  150.00  from holding Induction Healthcare Group or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Berkshire Hathaway  vs.  Induction Healthcare Group

Berkshire Hathaway

Risk-Adjusted Performance

0 of 100

Weak

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

Induction Healthcare

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Induction Healthcare Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Induction Healthcare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Berkshire Hathaway and Induction Healthcare

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

The idea behind Berkshire Hathaway and Induction Healthcare Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.