Correlation Between Berkshire Hathaway and Telefnica

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

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

Diversification Opportunities for Berkshire Hathaway and Telefnica

0.66

Correlation Coefficient

Berkshire Hathaway  Telefnica

Poor diversification

The 3 months correlation between Berkshire and Telefnica is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Telefnica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica SA 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 Telefnica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefnica SA has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Telefnica go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Telefnica

Assuming the 90 days trading horizon Berkshire Hathaway is expected to under-perform the Telefnica. In addition to that, Berkshire Hathaway is 1.01 times more volatile than Telefnica SA. It trades about -0.33 of its total potential returns per unit of risk. Telefnica SA is currently generating about 0.22 per unit of volatility. If you would invest  8,537  in Telefnica SA on September 25, 2024 and sell it today you would earn a total of  323.00  from holding Telefnica SA or generate 3.78% return on investment over 90 days.

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

Berkshire Hathaway  vs.  Telefnica SA

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.

Telefnica SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telefnica SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Telefnica may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Berkshire Hathaway and Telefnica

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

The idea behind Berkshire Hathaway and Telefnica SA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.