Correlation Between Berkshire Hathaway and Gentex

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

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

Diversification Opportunities for Berkshire Hathaway and Gentex

-0.34

Correlation Coefficient

Berkshire Hathaway  Gentex

Very good diversification

The 3 months correlation between Berkshire and Gentex is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Gentex go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Gentex

Assuming the 90 days horizon Berkshire Hathaway is expected to generate 41.63 times more return on investment than Gentex. However, Berkshire Hathaway is 41.63 times more volatile than Gentex. It trades about 0.05 of its potential returns per unit of risk. Gentex is currently generating about 0.0 per unit of risk. If you would invest  51,450,000  in Berkshire Hathaway on October 4, 2024 and sell it today you would earn a total of  14,850,000  from holding Berkshire Hathaway or generate 28.86% return on investment over 90 days.

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

Berkshire Hathaway  vs.  Gentex

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

Gentex

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gentex are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Gentex may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Berkshire Hathaway and Gentex

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

The idea behind Berkshire Hathaway and Gentex 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.