Correlation Between Berkshire Hathaway and Cineplex

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

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

Diversification Opportunities for Berkshire Hathaway and Cineplex

-0.28

Correlation Coefficient

Berkshire Hathaway  Cineplex

Very good diversification

The 3 months correlation between Berkshire and Cineplex is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway CDR and Cineplex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cineplex 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 CDR are associated (or correlated) with Cineplex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cineplex has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Cineplex go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Cineplex

Assuming the 90 days trading horizon Berkshire Hathaway CDR is expected to generate 0.55 times more return on investment than Cineplex. However, Berkshire Hathaway CDR is 1.81 times less risky than Cineplex. It trades about -0.19 of its potential returns per unit of risk. Cineplex is currently generating about -0.27 per unit of risk. If you would invest  3,490  in Berkshire Hathaway CDR on October 11, 2024 and sell it today you would lose (89.00) from holding Berkshire Hathaway CDR or give up 2.55% of portfolio value over 90 days.

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

Berkshire Hathaway CDR  vs.  Cineplex

Berkshire Hathaway CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Berkshire Hathaway CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Cineplex

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cineplex are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cineplex displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Berkshire Hathaway and Cineplex

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

The idea behind Berkshire Hathaway CDR and Cineplex 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.