Correlation Between Berkshire Hathaway and Danaher

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

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

Diversification Opportunities for Berkshire Hathaway and Danaher

-0.54

Correlation Coefficient

Berkshire Hathaway  Danaher

Excellent diversification

The 3 months correlation between Berkshire and Danaher is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Danaher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaher 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 Danaher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaher has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Danaher go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Danaher

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 0.7 times more return on investment than Danaher. However, Berkshire Hathaway is 1.43 times less risky than Danaher. It trades about 0.09 of its potential returns per unit of risk. Danaher is currently generating about 0.0 per unit of risk. If you would invest  13,496  in Berkshire Hathaway on September 4, 2024 and sell it today you would earn a total of  1,001  from holding Berkshire Hathaway or generate 7.42% return on investment over 90 days.

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

Berkshire Hathaway  vs.  Danaher

Berkshire Hathaway

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Danaher

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danaher has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Danaher is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Berkshire Hathaway and Danaher

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

The idea behind Berkshire Hathaway and Danaher 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.