Correlation Between Berkshire Hathaway and Clairvest

Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Clairvest 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 Clairvest 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 Clairvest Group, you can compare the effects of market volatilities on Berkshire Hathaway and Clairvest 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 Clairvest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Clairvest.

Diversification Opportunities for Berkshire Hathaway and Clairvest

0.36

Correlation Coefficient

Berkshire Hathaway  Clairvest

Weak diversification

The 3 months correlation between Berkshire and Clairvest is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway CDR and Clairvest Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clairvest Group 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 Clairvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clairvest Group has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Clairvest go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Clairvest

Assuming the 90 days trading horizon Berkshire Hathaway CDR is expected to under-perform the Clairvest. But the stock apears to be less risky and, when comparing its historical volatility, Berkshire Hathaway CDR is 1.88 times less risky than Clairvest. The stock trades about -0.28 of its potential returns per unit of risk. The Clairvest Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  7,100  in Clairvest Group on September 24, 2024 and sell it today you would lose (145.00) from holding Clairvest Group or give up 2.04% of portfolio value over 90 days.

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

Berkshire Hathaway CDR  vs.  Clairvest Group

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 current stock price disarray, may contribute to short-term losses for the investors.

Clairvest Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Berkshire Hathaway and Clairvest

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

The idea behind Berkshire Hathaway CDR and Clairvest Group 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.