Correlation Between Berkshire Hathaway and Guardian Capital

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

Diversification Opportunities for Berkshire Hathaway and Guardian Capital

0.29

Correlation Coefficient

Berkshire Hathaway  Guardian Capital

Modest diversification

The 3 months correlation between Berkshire and Guardian is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway CDR and Guardian Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Capital 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 Guardian Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Capital has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Guardian Capital go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Guardian Capital

Assuming the 90 days trading horizon Berkshire Hathaway CDR is expected to generate 0.65 times more return on investment than Guardian Capital. However, Berkshire Hathaway CDR is 1.53 times less risky than Guardian Capital. It trades about 0.07 of its potential returns per unit of risk. Guardian Capital Group is currently generating about 0.02 per unit of risk. If you would invest  3,550  in Berkshire Hathaway CDR on December 5, 2024 and sell it today you would earn a total of  169.00  from holding Berkshire Hathaway CDR or generate 4.76% return on investment over 90 days.

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

Berkshire Hathaway CDR  vs.  Guardian Capital Group

Berkshire Hathaway CDR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway CDR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Guardian Capital

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Capital Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Guardian Capital is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Berkshire Hathaway and Guardian Capital

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

The idea behind Berkshire Hathaway CDR and Guardian Capital 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.