Correlation Between Balfour Beatty and Berkshire Hathaway

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

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

Diversification Opportunities for Balfour Beatty and Berkshire Hathaway

0.26

Correlation Coefficient

Balfour Beatty  Berkshire Hathaway

Modest diversification

The 3 months correlation between Balfour and Berkshire is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Balfour Beatty plc and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Balfour Beatty 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 Balfour Beatty plc 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 Balfour Beatty i.e., Balfour Beatty and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Balfour Beatty and Berkshire Hathaway

Assuming the 90 days trading horizon Balfour Beatty plc is expected to generate 1.18 times more return on investment than Berkshire Hathaway. However, Balfour Beatty is 1.18 times more volatile than Berkshire Hathaway. It trades about 0.1 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.09 per unit of risk. If you would invest  32,017  in Balfour Beatty plc on September 27, 2024 and sell it today you would earn a total of  13,343  from holding Balfour Beatty plc or generate 41.67% return on investment over 90 days.

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

Balfour Beatty plc  vs.  Berkshire Hathaway

Balfour Beatty plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Balfour Beatty plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Balfour Beatty 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Balfour Beatty and Berkshire Hathaway

The main advantage of trading using opposite Balfour Beatty and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balfour Beatty 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 Balfour Beatty plc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.