Correlation Between Berkshire Hathaway and Manulife Fin

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

Diversification Opportunities for Berkshire Hathaway and Manulife Fin

-0.6

Correlation Coefficient

Berkshire Hathaway  Manulife Fin

Excellent diversification

The 3 months correlation between Berkshire and Manulife is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway CDR and Manulife Fin Non in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Fin Non 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 Manulife Fin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Fin Non has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Manulife Fin go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Manulife Fin

Assuming the 90 days trading horizon Berkshire Hathaway CDR is expected to generate 2.43 times more return on investment than Manulife Fin. However, Berkshire Hathaway is 2.43 times more volatile than Manulife Fin Non. It trades about 0.03 of its potential returns per unit of risk. Manulife Fin Non is currently generating about 0.0 per unit of risk. If you would invest  3,446  in Berkshire Hathaway CDR on October 26, 2024 and sell it today you would earn a total of  17.00  from holding Berkshire Hathaway CDR or generate 0.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Berkshire Hathaway CDR  vs.  Manulife Fin Non

Berkshire Hathaway CDR

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway CDR are ranked lower than 1 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

Manulife Fin Non

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Fin Non are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Manulife Fin 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 Manulife Fin

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

The idea behind Berkshire Hathaway CDR and Manulife Fin Non 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.