Correlation Between Caribbean Utilities and Berkshire Hathaway

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

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

Diversification Opportunities for Caribbean Utilities and Berkshire Hathaway

-0.79

Correlation Coefficient

Caribbean Utilities  Berkshire Hathaway

Pay attention - limited upside

The 3 months correlation between Caribbean and Berkshire is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Caribbean Utilities and Berkshire Hathaway CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway CDR and Caribbean Utilities 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 Caribbean Utilities are associated (or correlated) with Berkshire Hathaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Hathaway CDR has no effect on the direction of Caribbean Utilities i.e., Caribbean Utilities and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Caribbean Utilities and Berkshire Hathaway

Assuming the 90 days trading horizon Caribbean Utilities is expected to under-perform the Berkshire Hathaway. But the stock apears to be less risky and, when comparing its historical volatility, Caribbean Utilities is 1.1 times less risky than Berkshire Hathaway. The stock trades about -0.07 of its potential returns per unit of risk. The Berkshire Hathaway CDR is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,446  in Berkshire Hathaway CDR on December 26, 2024 and sell it today you would earn a total of  514.00  from holding Berkshire Hathaway CDR or generate 14.92% return on investment over 90 days.

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

Caribbean Utilities  vs.  Berkshire Hathaway CDR

Caribbean Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caribbean Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Caribbean Utilities is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Berkshire Hathaway CDR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway CDR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Berkshire Hathaway displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caribbean Utilities and Berkshire Hathaway

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

The idea behind Caribbean Utilities and Berkshire Hathaway CDR 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.