Correlation Between Berkshire Hathaway and Northview Residential

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

Diversification Opportunities for Berkshire Hathaway and Northview Residential

-0.11

Correlation Coefficient

Berkshire Hathaway  Northview Residential

Good diversification

The 3 months correlation between Berkshire and Northview is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway CDR and Northview Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northview Residential 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 Northview Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northview Residential has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Northview Residential go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Northview Residential

Assuming the 90 days trading horizon Berkshire Hathaway CDR is expected to generate 0.96 times more return on investment than Northview Residential. However, Berkshire Hathaway CDR is 1.04 times less risky than Northview Residential. It trades about 0.11 of its potential returns per unit of risk. Northview Residential REIT is currently generating about -0.22 per unit of risk. If you would invest  3,608  in Berkshire Hathaway CDR on December 1, 2024 and sell it today you would earn a total of  262.00  from holding Berkshire Hathaway CDR or generate 7.26% 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.  Northview Residential REIT

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 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Northview Residential

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northview Residential REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Berkshire Hathaway and Northview Residential

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

The idea behind Berkshire Hathaway CDR and Northview Residential REIT 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.