Correlation Between Berkshire Hathaway and Oracle

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

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

Diversification Opportunities for Berkshire Hathaway and Oracle

0.75

Correlation Coefficient

Berkshire Hathaway  Oracle

Poor diversification

The 3 months correlation between Berkshire and Oracle is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle 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 Oracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and Oracle go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and Oracle

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 0.57 times more return on investment than Oracle. However, Berkshire Hathaway is 1.75 times less risky than Oracle. It trades about 0.03 of its potential returns per unit of risk. Oracle is currently generating about -0.03 per unit of risk. If you would invest  42,545  in Berkshire Hathaway on October 15, 2024 and sell it today you would earn a total of  615.00  from holding Berkshire Hathaway or generate 1.45% 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.  Oracle

Berkshire Hathaway

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 1 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Oracle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oracle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Oracle is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Berkshire Hathaway and Oracle

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

The idea behind Berkshire Hathaway and Oracle 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.