Correlation Between Berkshire Hathaway and PACCAR

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Can any of the company-specific risk be diversified away by investing in both Berkshire Hathaway and PACCAR 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 PACCAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Berkshire Hathaway and PACCAR Inc, you can compare the effects of market volatilities on Berkshire Hathaway and PACCAR 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 PACCAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkshire Hathaway and PACCAR.

Diversification Opportunities for Berkshire Hathaway and PACCAR

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Berkshire and PACCAR is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Berkshire Hathaway and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Berkshire Hathaway i.e., Berkshire Hathaway and PACCAR go up and down completely randomly.

Pair Corralation between Berkshire Hathaway and PACCAR

Assuming the 90 days trading horizon Berkshire Hathaway is expected to generate 2.0 times less return on investment than PACCAR. But when comparing it to its historical volatility, Berkshire Hathaway is 1.59 times less risky than PACCAR. It trades about 0.05 of its potential returns per unit of risk. PACCAR Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,582  in PACCAR Inc on September 27, 2024 and sell it today you would earn a total of  458.00  from holding PACCAR Inc or generate 4.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Berkshire Hathaway  vs.  PACCAR Inc

 Performance 
       Timeline  
Berkshire Hathaway 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 6 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.
PACCAR Inc 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Berkshire Hathaway and PACCAR Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Berkshire Hathaway and PACCAR

The main advantage of trading using opposite Berkshire Hathaway and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkshire Hathaway position performs unexpectedly, PACCAR 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 PACCAR will offset losses from the drop in PACCAR's long position.
The idea behind Berkshire Hathaway and PACCAR 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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