Correlation Between Anglo Asian and Berkshire Hathaway

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

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

Diversification Opportunities for Anglo Asian and Berkshire Hathaway

-0.62

Correlation Coefficient

Anglo Asian  Berkshire Hathaway

Excellent diversification

The 3 months correlation between Anglo and Berkshire is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Anglo Asian Mining and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Anglo Asian 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 Anglo Asian Mining 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 Anglo Asian i.e., Anglo Asian and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Anglo Asian and Berkshire Hathaway

Assuming the 90 days trading horizon Anglo Asian Mining is expected to under-perform the Berkshire Hathaway. In addition to that, Anglo Asian is 2.22 times more volatile than Berkshire Hathaway. It trades about -0.03 of its total potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.01 per unit of volatility. If you would invest  46,075  in Berkshire Hathaway on October 27, 2024 and sell it today you would earn a total of  75.00  from holding Berkshire Hathaway or generate 0.16% return on investment over 90 days.

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

Anglo Asian Mining  vs.  Berkshire Hathaway

Anglo Asian Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Anglo Asian and Berkshire Hathaway

The main advantage of trading using opposite Anglo Asian and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo Asian 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 Anglo Asian Mining 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.