Correlation Between Berkshire Hathaway and Caixa Seguridade

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

By analyzing existing cross correlation between Berkshire Hathaway and Caixa Seguridade Participaes, you can compare the effects of market volatilities on Berkshire Hathaway and Caixa Seguridade 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 Caixa Seguridade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Caixa Seguridade.

Diversification Opportunities for Berkshire Hathaway and Caixa Seguridade

0.27

Correlation Coefficient

Berkshire Hathaway  Caixa Seguridade

Modest diversification

The 3 months correlation between Berkshire and Caixa is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Caixa Seguridade Participaes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caixa Seguridade Par 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 Caixa Seguridade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caixa Seguridade Par has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Caixa Seguridade go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Caixa Seguridade

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 1.04 times less return on investment than Caixa Seguridade. But when comparing it to its historical volatility, Berkshire Hathaway is 1.23 times less risky than Caixa Seguridade. It trades about 0.14 of its potential returns per unit of risk. Caixa Seguridade Participaes is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,478  in Caixa Seguridade Participaes on September 12, 2024 and sell it today you would earn a total of  167.00  from holding Caixa Seguridade Participaes or generate 11.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Berkshire Hathaway  vs.  Caixa Seguridade Participaes

Berkshire Hathaway

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Caixa Seguridade Par

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caixa Seguridade Participaes are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caixa Seguridade may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Berkshire Hathaway and Caixa Seguridade

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

The idea behind Berkshire Hathaway and Caixa Seguridade Participaes 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.