Correlation Between Firsthand Technology and Berkshire Focus

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

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

Diversification Opportunities for Firsthand Technology and Berkshire Focus

0.91

Correlation Coefficient

Firsthand Technology  Berkshire Focus

Almost no diversification

The 3 months correlation between Firsthand and Berkshire is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Firsthand Technology Opportuni and Berkshire Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Focus and Firsthand Technology 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 Firsthand Technology Opportunities 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 Firsthand Technology i.e., Firsthand Technology and Berkshire Focus go up and down completely randomly.

Pair Corralation between Firsthand Technology and Berkshire Focus

Assuming the 90 days horizon Firsthand Technology Opportunities is expected to under-perform the Berkshire Focus. In addition to that, Firsthand Technology is 1.13 times more volatile than Berkshire Focus. It trades about -0.04 of its total potential returns per unit of risk. Berkshire Focus is currently generating about 0.08 per unit of volatility. If you would invest  1,345  in Berkshire Focus on August 13, 2024 and sell it today you would earn a total of  1,542  from holding Berkshire Focus or generate 114.65% return on investment over 90 days.

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

Firsthand Technology Opportuni  vs.  Berkshire Focus

Firsthand Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Firsthand Technology Opportunities are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Firsthand Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Berkshire Focus

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Focus are ranked lower than 16 (%) 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 Firsthand Technology and Berkshire Focus

The main advantage of trading using opposite Firsthand Technology and Berkshire Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Firsthand Technology 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 Firsthand Technology Opportunities 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.