Correlation Between Berkshire Hathaway and NOV

Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and NOV 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 NOV into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Berkshire Hathaway and NOV Inc, you can compare the effects of market volatilities on Berkshire Hathaway and NOV 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 NOV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and NOV.

Diversification Opportunities for Berkshire Hathaway and NOV

-0.01

Correlation Coefficient

Berkshire Hathaway  NOV

Good diversification

The 3 months correlation between Berkshire and NOV is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and NOV Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOV Inc 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 are associated (or correlated) with NOV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOV Inc has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and NOV go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and NOV

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 22.65 times more return on investment than NOV. However, Berkshire Hathaway is 22.65 times more volatile than NOV Inc. It trades about 0.05 of its potential returns per unit of risk. NOV Inc is currently generating about 0.13 per unit of risk. If you would invest  881,655  in Berkshire Hathaway on September 23, 2024 and sell it today you would earn a total of  30,945  from holding Berkshire Hathaway or generate 3.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Berkshire Hathaway  vs.  NOV Inc

Berkshire Hathaway

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NOV Inc

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Berkshire Hathaway and NOV

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

The idea behind Berkshire Hathaway and NOV Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.