Correlation Between Berkshire Hathaway and Johnson Matthey

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

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

Diversification Opportunities for Berkshire Hathaway and Johnson Matthey

0.65

Correlation Coefficient

Berkshire Hathaway  Johnson Matthey

Poor diversification

The 3 months correlation between Berkshire and Johnson is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Johnson Matthey PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Matthey PLC 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 Johnson Matthey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Matthey PLC has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Johnson Matthey go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Johnson Matthey

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 1.76 times more return on investment than Johnson Matthey. However, Berkshire Hathaway is 1.76 times more volatile than Johnson Matthey PLC. It trades about 0.2 of its potential returns per unit of risk. Johnson Matthey PLC is currently generating about 0.0 per unit of risk. If you would invest  47,075  in Berkshire Hathaway on December 2, 2024 and sell it today you would earn a total of  3,575  from holding Berkshire Hathaway or generate 7.59% return on investment over 90 days.

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

Berkshire Hathaway  vs.  Johnson Matthey PLC

Berkshire Hathaway

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Johnson Matthey PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Matthey PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Johnson Matthey is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Berkshire Hathaway and Johnson Matthey

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

The idea behind Berkshire Hathaway and Johnson Matthey PLC 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.