Correlation Between Brookfield Infrastructure and Berkshire Hathaway

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

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

Diversification Opportunities for Brookfield Infrastructure and Berkshire Hathaway

0.63

Correlation Coefficient

Brookfield Infrastructure  Berkshire Hathaway

Poor diversification

The 3 months correlation between Brookfield and Berkshire is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part and Berkshire Hathaway CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway CDR and Brookfield Infrastructure 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 Brookfield Infrastructure Partners 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 CDR has no effect on the direction of Brookfield Infrastructure i.e., Brookfield Infrastructure and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Brookfield Infrastructure and Berkshire Hathaway

Assuming the 90 days trading horizon Brookfield Infrastructure is expected to generate 2.97 times less return on investment than Berkshire Hathaway. But when comparing it to its historical volatility, Brookfield Infrastructure Partners is 2.55 times less risky than Berkshire Hathaway. It trades about 0.17 of its potential returns per unit of risk. Berkshire Hathaway CDR is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,345  in Berkshire Hathaway CDR on September 4, 2024 and sell it today you would earn a total of  208.00  from holding Berkshire Hathaway CDR or generate 6.22% return on investment over 90 days.

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

Brookfield Infrastructure Part  vs.  Berkshire Hathaway CDR

Brookfield Infrastructure

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Infrastructure Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield Infrastructure is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Berkshire Hathaway CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Berkshire Hathaway CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brookfield Infrastructure and Berkshire Hathaway

The main advantage of trading using opposite Brookfield Infrastructure and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Infrastructure 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 Brookfield Infrastructure Partners and Berkshire Hathaway CDR 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.