Correlation Between Berkshire Hathaway and HUMANA

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

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

Diversification Opportunities for Berkshire Hathaway and HUMANA

0.61

Correlation Coefficient

Berkshire Hathaway  HUMANA

Poor diversification

The 3 months correlation between Berkshire and HUMANA is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC 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 HUMANA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUMANA INC has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and HUMANA go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and HUMANA

Assuming the 90 days horizon Berkshire Hathaway is expected to generate 53.93 times less return on investment than HUMANA. But when comparing it to its historical volatility, Berkshire Hathaway is 82.47 times less risky than HUMANA. It trades about 0.11 of its potential returns per unit of risk. HUMANA INC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,744  in HUMANA INC on June 23, 2024 and sell it today you would earn a total of  137.00  from holding HUMANA INC or generate 1.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.54%
Values	Daily Returns

Berkshire Hathaway  vs.  HUMANA INC

Berkshire Hathaway

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in October 2024.

HUMANA INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HUMANA INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HUMANA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Berkshire Hathaway and HUMANA

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

The idea behind Berkshire Hathaway and HUMANA INC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.