Correlation Between Raytheon Technologies and Berkshire Hathaway

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

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

Diversification Opportunities for Raytheon Technologies and Berkshire Hathaway

0.11

Correlation Coefficient

Raytheon Technologies  Berkshire Hathaway

Average diversification

The 3 months correlation between Raytheon and Berkshire is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Raytheon Technologies 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 Raytheon Technologies Corp are associated (or correlated) with Berkshire Hathaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Hathaway has no effect on the direction of Raytheon Technologies i.e., Raytheon Technologies and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Raytheon Technologies and Berkshire Hathaway

Assuming the 90 days trading horizon Raytheon Technologies Corp is expected to generate 1.28 times more return on investment than Berkshire Hathaway. However, Raytheon Technologies is 1.28 times more volatile than Berkshire Hathaway. It trades about -0.1 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about -0.26 per unit of risk. If you would invest  11,847  in Raytheon Technologies Corp on October 4, 2024 and sell it today you would lose (218.00) from holding Raytheon Technologies Corp or give up 1.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Raytheon Technologies Corp  vs.  Berkshire Hathaway

Raytheon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Berkshire Hathaway

Risk-Adjusted Performance

0 of 100

Very 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.

Pair Trading with Raytheon Technologies and Berkshire Hathaway

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

The idea behind Raytheon Technologies Corp and Berkshire Hathaway 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.