Correlation Between Aluminumof China and Berkshire Hathaway

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

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

Diversification Opportunities for Aluminumof China and Berkshire Hathaway

0.16

Correlation Coefficient

Aluminumof China  Berkshire Hathaway

Average diversification

The 3 months correlation between Aluminumof and Berkshire is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Aluminumof China 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 Aluminum of 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 Aluminumof China i.e., Aluminumof China and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Aluminumof China and Berkshire Hathaway

Assuming the 90 days horizon Aluminumof China is expected to generate 4.36 times less return on investment than Berkshire Hathaway. In addition to that, Aluminumof China is 2.55 times more volatile than Berkshire Hathaway. It trades about 0.01 of its total potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.15 per unit of volatility. If you would invest  66,700,000  in Berkshire Hathaway on December 4, 2024 and sell it today you would earn a total of  6,700,000  from holding Berkshire Hathaway or generate 10.04% return on investment over 90 days.

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

Aluminum of  vs.  Berkshire Hathaway

Aluminumof China

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aluminumof China is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Berkshire Hathaway

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aluminumof China and Berkshire Hathaway

The main advantage of trading using opposite Aluminumof China and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China 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 Aluminum of 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..