Correlation Between Berkshire Hathaway and LIFENET INSURANCE
Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and LIFENET INSURANCE 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 LIFENET INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and LIFENET INSURANCE CO, you can compare the effects of market volatilities on Berkshire Hathaway and LIFENET INSURANCE 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 LIFENET INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and LIFENET INSURANCE.
Diversification Opportunities for Berkshire Hathaway and LIFENET INSURANCE
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Berkshire and LIFENET is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and LIFENET INSURANCE CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFENET INSURANCE 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 LIFENET INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFENET INSURANCE has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and LIFENET INSURANCE go up and down completely randomly.
Pair Corralation between Berkshire Hathaway and LIFENET INSURANCE
Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 1.51 times less return on investment than LIFENET INSURANCE. But when comparing it to its historical volatility, Berkshire Hathaway is 2.63 times less risky than LIFENET INSURANCE. It trades about 0.08 of its potential returns per unit of risk. LIFENET INSURANCE CO is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 745.00 in LIFENET INSURANCE CO on August 24, 2024 and sell it today you would earn a total of 455.00 from holding LIFENET INSURANCE CO or generate 61.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Berkshire Hathaway vs. LIFENET INSURANCE CO
Performance |
| Timeline |
| Berkshire Hathaway |
| LIFENET INSURANCE |
Berkshire Hathaway and LIFENET INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Berkshire Hathaway and LIFENET INSURANCE
The main advantage of trading using opposite Berkshire Hathaway and LIFENET INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, LIFENET INSURANCE 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 LIFENET INSURANCE will offset losses from the drop in LIFENET INSURANCE's long position.| Berkshire Hathaway vs. CompuGroup Medical SE | Berkshire Hathaway vs. CVR Medical Corp | Berkshire Hathaway vs. Diamyd Medical AB | Berkshire Hathaway vs. Merit Medical Systems |
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Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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