Correlation Between Berkshire Hathaway and Litigation Capital

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

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

Diversification Opportunities for Berkshire Hathaway and Litigation Capital

0.57

Correlation Coefficient

Berkshire Hathaway  Litigation Capital

Very weak diversification

The 3 months correlation between Berkshire and Litigation is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Litigation Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litigation Capital 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 Litigation Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litigation Capital has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Litigation Capital go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Litigation Capital

Assuming the 90 days trading horizon Berkshire Hathaway is expected to under-perform the Litigation Capital. But the stock apears to be less risky and, when comparing its historical volatility, Berkshire Hathaway is 2.65 times less risky than Litigation Capital. The stock trades about -0.02 of its potential returns per unit of risk. The Litigation Capital Management is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  9,900  in Litigation Capital Management on October 6, 2024 and sell it today you would lose (140.00) from holding Litigation Capital Management or give up 1.41% of portfolio value over 90 days.

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

Berkshire Hathaway  vs.  Litigation Capital Management

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.

Litigation Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Litigation Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Litigation Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Berkshire Hathaway and Litigation Capital

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

The idea behind Berkshire Hathaway and Litigation Capital Management 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.