Correlation Between Berkshire Hathaway and BANK HANDLOWY

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

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

Diversification Opportunities for Berkshire Hathaway and BANK HANDLOWY

-0.56

Correlation Coefficient

Berkshire Hathaway  BANK HANDLOWY

Excellent diversification

The 3 months correlation between Berkshire and BANK is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and BANK HANDLOWY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK HANDLOWY 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 BANK HANDLOWY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK HANDLOWY has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and BANK HANDLOWY go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and BANK HANDLOWY

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 1.89 times more return on investment than BANK HANDLOWY. However, Berkshire Hathaway is 1.89 times more volatile than BANK HANDLOWY. It trades about 0.07 of its potential returns per unit of risk. BANK HANDLOWY is currently generating about -0.2 per unit of risk. If you would invest  43,170  in Berkshire Hathaway on September 3, 2024 and sell it today you would earn a total of  2,715  from holding Berkshire Hathaway or generate 6.29% return on investment over 90 days.

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

Berkshire Hathaway  vs.  BANK HANDLOWY

Berkshire Hathaway

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BANK HANDLOWY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK HANDLOWY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Berkshire Hathaway and BANK HANDLOWY

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

The idea behind Berkshire Hathaway and BANK HANDLOWY 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.