Correlation Between Berkshire Hathaway and Great Wes

Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and Great Wes 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 Great Wes 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 Great Wes 515, you can compare the effects of market volatilities on Berkshire Hathaway and Great Wes 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 Great Wes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and Great Wes.

Diversification Opportunities for Berkshire Hathaway and Great Wes

0.35

Correlation Coefficient

Berkshire Hathaway  Great Wes

Weak diversification

The 3 months correlation between Berkshire and Great is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway CDR and Great Wes 515 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Wes 515 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 Great Wes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Wes 515 has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Great Wes go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Great Wes

Assuming the 90 days trading horizon Berkshire Hathaway CDR is expected to generate 2.29 times more return on investment than Great Wes. However, Berkshire Hathaway is 2.29 times more volatile than Great Wes 515. It trades about 0.2 of its potential returns per unit of risk. Great Wes 515 is currently generating about 0.18 per unit of risk. If you would invest  3,541  in Berkshire Hathaway CDR on November 29, 2024 and sell it today you would earn a total of  168.00  from holding Berkshire Hathaway CDR or generate 4.74% 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.  Great Wes 515

Berkshire Hathaway CDR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway CDR are ranked lower than 2 (%) 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.

Great Wes 515

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Wes 515 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Great Wes is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Berkshire Hathaway and Great Wes

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

The idea behind Berkshire Hathaway CDR and Great Wes 515 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.