Correlation Between Berkshire Hathaway and Tamarack Valley

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

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

Diversification Opportunities for Berkshire Hathaway and Tamarack Valley

0.53

Correlation Coefficient

Berkshire Hathaway  Tamarack Valley

Very weak diversification

The 3 months correlation between Berkshire and Tamarack is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Tamarack Valley Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamarack Valley 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 Tamarack Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamarack Valley Energy has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Tamarack Valley go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Tamarack Valley

Assuming the 90 days horizon Berkshire Hathaway is expected to generate 0.37 times more return on investment than Tamarack Valley. However, Berkshire Hathaway is 2.71 times less risky than Tamarack Valley. It trades about 0.09 of its potential returns per unit of risk. Tamarack Valley Energy is currently generating about 0.02 per unit of risk. If you would invest  45,870,000  in Berkshire Hathaway on September 12, 2024 and sell it today you would earn a total of  23,592,000  from holding Berkshire Hathaway or generate 51.43% return on investment over 90 days.

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

Berkshire Hathaway  vs.  Tamarack Valley Energy

Berkshire Hathaway

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 3 (%) 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.

Tamarack Valley Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tamarack Valley Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Tamarack Valley reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Berkshire Hathaway and Tamarack Valley

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

The idea behind Berkshire Hathaway and Tamarack Valley 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.