Correlation Between Berkshire Hathaway and BG Foods

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

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

Diversification Opportunities for Berkshire Hathaway and BG Foods

-0.82

Correlation Coefficient

Berkshire Hathaway  BG Foods

Pay attention - limited upside

The 3 months correlation between Berkshire and DHR is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and BG Foods go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and BG Foods

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 0.35 times more return on investment than BG Foods. However, Berkshire Hathaway is 2.86 times less risky than BG Foods. It trades about 0.1 of its potential returns per unit of risk. BG Foods is currently generating about 0.0 per unit of risk. If you would invest  33,080  in Berkshire Hathaway on October 11, 2024 and sell it today you would earn a total of  10,670  from holding Berkshire Hathaway or generate 32.26% return on investment over 90 days.

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

Berkshire Hathaway  vs.  BG Foods

Berkshire Hathaway

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

BG Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BG Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BG Foods is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Berkshire Hathaway and BG Foods

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

The idea behind Berkshire Hathaway and BG Foods 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.