Correlation Between Berkshire Hathaway and North Peak

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

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

Diversification Opportunities for Berkshire Hathaway and North Peak

-0.38

Correlation Coefficient

Berkshire Hathaway  North Peak

Very good diversification

The 3 months correlation between Berkshire and North is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and North Peak Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Peak Resources 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 North Peak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Peak Resources has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and North Peak go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and North Peak

Assuming the 90 days horizon Berkshire Hathaway is expected to generate 0.26 times more return on investment than North Peak. However, Berkshire Hathaway is 3.78 times less risky than North Peak. It trades about 0.21 of its potential returns per unit of risk. North Peak Resources is currently generating about 0.0 per unit of risk. If you would invest  67,812,000  in Berkshire Hathaway on December 29, 2024 and sell it today you would earn a total of  11,213,000  from holding Berkshire Hathaway or generate 16.54% 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.  North Peak Resources

Berkshire Hathaway

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Berkshire Hathaway sustained solid returns over the last few months and may actually be approaching a breakup point.

North Peak Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days North Peak Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, North Peak is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Berkshire Hathaway and North Peak

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

The idea behind Berkshire Hathaway and North Peak Resources 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.