Correlation Between Berkshire Hathaway and Precious Metals

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

Diversification Opportunities for Berkshire Hathaway and Precious Metals

-0.12

Correlation Coefficient

Berkshire Hathaway  Precious Metals

Good diversification

The 3 months correlation between Berkshire and Precious is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway CDR and Precious Metals And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals And 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 Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals And has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Precious Metals go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Precious Metals

Assuming the 90 days trading horizon Berkshire Hathaway CDR is expected to generate 0.48 times more return on investment than Precious Metals. However, Berkshire Hathaway CDR is 2.08 times less risky than Precious Metals. It trades about 0.07 of its potential returns per unit of risk. Precious Metals And is currently generating about 0.03 per unit of risk. If you would invest  3,148  in Berkshire Hathaway CDR on September 22, 2024 and sell it today you would earn a total of  271.00  from holding Berkshire Hathaway CDR or generate 8.61% return on investment over 90 days.

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

Berkshire Hathaway CDR  vs.  Precious Metals And

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.

Precious Metals And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precious Metals And has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Berkshire Hathaway and Precious Metals

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

The idea behind Berkshire Hathaway CDR and Precious Metals And 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.