Correlation Between Berkshire Hathaway and Citizens Financial

Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Citizens 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 Citizens 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 Citizens Financial Group, you can compare the effects of market volatilities on Berkshire Hathaway and Citizens 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 Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Citizens Financial.

Diversification Opportunities for Berkshire Hathaway and Citizens Financial

-0.46

Correlation Coefficient

Berkshire Hathaway  Citizens Financial

Very good diversification

The 3 months correlation between Berkshire and Citizens is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens 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 Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Citizens Financial go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Citizens Financial

Assuming the 90 days horizon Berkshire Hathaway is expected to generate 43.73 times more return on investment than Citizens Financial. However, Berkshire Hathaway is 43.73 times more volatile than Citizens Financial Group. It trades about 0.07 of its potential returns per unit of risk. Citizens Financial Group is currently generating about 0.1 per unit of risk. If you would invest  57,000,000  in Berkshire Hathaway on September 20, 2024 and sell it today you would earn a total of  8,050,000  from holding Berkshire Hathaway or generate 14.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.48%
Values	Daily Returns

Berkshire Hathaway  vs.  Citizens Financial Group

Berkshire Hathaway

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Berkshire Hathaway reported solid returns over the last few months and may actually be approaching a breakup point.

Citizens Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Citizens Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Berkshire Hathaway and Citizens Financial

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

The idea behind Berkshire Hathaway and Citizens Financial Group 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.