Correlation Between PPHE HOTEL and Berkshire Hathaway

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

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

Diversification Opportunities for PPHE HOTEL and Berkshire Hathaway

0.25

Correlation Coefficient

PPHE HOTEL  Berkshire Hathaway

Modest diversification

The 3 months correlation between PPHE and Berkshire is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding PPHE HOTEL GROUP and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and PPHE HOTEL 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 PPHE HOTEL GROUP 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 PPHE HOTEL i.e., PPHE HOTEL and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between PPHE HOTEL and Berkshire Hathaway

Assuming the 90 days trading horizon PPHE HOTEL is expected to generate 59.96 times less return on investment than Berkshire Hathaway. But when comparing it to its historical volatility, PPHE HOTEL GROUP is 117.98 times less risky than Berkshire Hathaway. It trades about 0.42 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,391,136  in Berkshire Hathaway on October 3, 2024 and sell it today you would earn a total of  63,958,864  from holding Berkshire Hathaway or generate 4597.6% return on investment over 90 days.

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

PPHE HOTEL GROUP  vs.  Berkshire Hathaway

PPHE HOTEL GROUP

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PPHE HOTEL GROUP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, PPHE HOTEL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Berkshire Hathaway

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Berkshire Hathaway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PPHE HOTEL and Berkshire Hathaway

The main advantage of trading using opposite PPHE HOTEL and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PPHE HOTEL 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 PPHE HOTEL GROUP 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..