Correlation Between Berkshire Hathaway and Redbubble

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

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

Diversification Opportunities for Berkshire Hathaway and Redbubble

-0.35

Correlation Coefficient

Berkshire Hathaway  Redbubble

Very good diversification

The 3 months correlation between Berkshire and Redbubble is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Redbubble Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redbubble Limited 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 Redbubble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redbubble Limited has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Redbubble go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Redbubble

Assuming the 90 days horizon Berkshire Hathaway is expected to generate 3.17 times less return on investment than Redbubble. But when comparing it to its historical volatility, Berkshire Hathaway is 7.61 times less risky than Redbubble. It trades about 0.12 of its potential returns per unit of risk. Redbubble Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Redbubble Limited on December 1, 2024 and sell it today you would earn a total of  1.00  from holding Redbubble Limited or generate 6.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Berkshire Hathaway  vs.  Redbubble Limited

Berkshire Hathaway

Risk-Adjusted Performance

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 somewhat fragile basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Redbubble Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Redbubble Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Redbubble reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Berkshire Hathaway and Redbubble

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

The idea behind Berkshire Hathaway and Redbubble Limited 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.