Correlation Between Berkshire Hathaway and SSC Security

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

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

Diversification Opportunities for Berkshire Hathaway and SSC Security

0.74

Correlation Coefficient

Berkshire Hathaway  SSC Security

Poor diversification

The 3 months correlation between Berkshire and SSC is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and SSC Security Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSC Security Services 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 SSC Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSC Security Services has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and SSC Security go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and SSC Security

Assuming the 90 days horizon Berkshire Hathaway is expected to generate 1.72 times less return on investment than SSC Security. But when comparing it to its historical volatility, Berkshire Hathaway is 5.65 times less risky than SSC Security. It trades about 0.08 of its potential returns per unit of risk. SSC Security Services is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  185.00  in SSC Security Services on September 24, 2024 and sell it today you would lose (4.00) from holding SSC Security Services or give up 2.16% of portfolio value over 90 days.

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

Berkshire Hathaway  vs.  SSC Security Services

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.

SSC Security Services

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Berkshire Hathaway and SSC Security

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

The idea behind Berkshire Hathaway and SSC Security Services 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.