Correlation Between Berkshire Hathaway and Acreage Holdings

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

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

Diversification Opportunities for Berkshire Hathaway and Acreage Holdings

-0.44

Correlation Coefficient

Berkshire Hathaway  Acreage Holdings

Very good diversification

The 3 months correlation between Berkshire and Acreage is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Acreage Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acreage Holdings 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 Acreage Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acreage Holdings has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Acreage Holdings go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Acreage Holdings

Assuming the 90 days horizon Berkshire Hathaway is expected to generate 0.08 times more return on investment than Acreage Holdings. However, Berkshire Hathaway is 12.26 times less risky than Acreage Holdings. It trades about 0.02 of its potential returns per unit of risk. Acreage Holdings is currently generating about -0.01 per unit of risk. If you would invest  71,591,000  in Berkshire Hathaway on September 3, 2024 and sell it today you would earn a total of  813,000  from holding Berkshire Hathaway or generate 1.14% 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.  Acreage Holdings

Berkshire Hathaway

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Acreage Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acreage Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Berkshire Hathaway and Acreage Holdings

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

The idea behind Berkshire Hathaway and Acreage Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.