Correlation Between Berkshire Hathaway and Truist Financial

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

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

Diversification Opportunities for Berkshire Hathaway and Truist Financial

0.58

Correlation Coefficient

Berkshire Hathaway  Truist Financial

Very weak diversification

The 3 months correlation between Berkshire and Truist is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial and Berkshire Hathaway 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 Berkshire Hathaway are associated (or correlated) with Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Truist Financial go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Truist Financial

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 0.52 times more return on investment than Truist Financial. However, Berkshire Hathaway is 1.92 times less risky than Truist Financial. It trades about 0.0 of its potential returns per unit of risk. Truist Financial is currently generating about -0.18 per unit of risk. If you would invest  14,100  in Berkshire Hathaway on October 8, 2024 and sell it today you would lose (16.00) from holding Berkshire Hathaway or give up 0.11% of portfolio value over 90 days.

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

Berkshire Hathaway  vs.  Truist Financial

Berkshire Hathaway

Risk-Adjusted Performance

12 of 100

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 somewhat weak basic indicators, Berkshire Hathaway sustained solid returns over the last few months and may actually be approaching a breakup point.

Truist Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Truist Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Berkshire Hathaway and Truist Financial

The main advantage of trading using opposite Berkshire Hathaway and Truist Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, Truist Financial 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 Truist Financial will offset losses from the drop in Truist Financial's long position.

The idea behind Berkshire Hathaway and Truist Financial 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.