Correlation Between Berkshire Hathaway and GulfSlope Energy

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

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

Diversification Opportunities for Berkshire Hathaway and GulfSlope Energy

0.0

Correlation Coefficient

Berkshire Hathaway  GulfSlope Energy

Pay attention - limited upside

The 3 months correlation between Berkshire and GulfSlope is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and GulfSlope Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GulfSlope Energy 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 GulfSlope Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GulfSlope Energy has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and GulfSlope Energy go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and GulfSlope Energy

Assuming the 90 days horizon Berkshire Hathaway is expected to generate 25.53 times less return on investment than GulfSlope Energy. But when comparing it to its historical volatility, Berkshire Hathaway is 64.35 times less risky than GulfSlope Energy. It trades about 0.11 of its potential returns per unit of risk. GulfSlope Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.10  in GulfSlope Energy on September 17, 2024 and sell it today you would lose (0.09) from holding GulfSlope Energy or give up 90.0% of portfolio value over 90 days.

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

Berkshire Hathaway  vs.  GulfSlope Energy

Berkshire Hathaway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Berkshire Hathaway has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

GulfSlope Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GulfSlope Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, GulfSlope Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Berkshire Hathaway and GulfSlope Energy

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

The idea behind Berkshire Hathaway and GulfSlope Energy 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.