Correlation Between WisdomTree Investments and Berkshire Hathaway

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

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

Diversification Opportunities for WisdomTree Investments and Berkshire Hathaway

-0.72

Correlation Coefficient

WisdomTree Investments  Berkshire Hathaway

Pay attention - limited upside

The 3 months correlation between WisdomTree and Berkshire is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Investments and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and WisdomTree Investments 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 WisdomTree Investments 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 WisdomTree Investments i.e., WisdomTree Investments and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between WisdomTree Investments and Berkshire Hathaway

Assuming the 90 days horizon WisdomTree Investments is expected to under-perform the Berkshire Hathaway. In addition to that, WisdomTree Investments is 1.43 times more volatile than Berkshire Hathaway. It trades about -0.17 of its total potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.13 per unit of volatility. If you would invest  43,745  in Berkshire Hathaway on December 25, 2024 and sell it today you would earn a total of  4,655  from holding Berkshire Hathaway or generate 10.64% return on investment over 90 days.

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

WisdomTree Investments  vs.  Berkshire Hathaway

WisdomTree Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Berkshire Hathaway

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with WisdomTree Investments and Berkshire Hathaway

The main advantage of trading using opposite WisdomTree Investments and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Investments 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 WisdomTree Investments 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..