Correlation Between Dairy Farm and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both Dairy Farm 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 Dairy Farm and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dairy Farm International and Berkshire Hathaway, you can compare the effects of market volatilities on Dairy Farm 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 Dairy Farm with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and Berkshire Hathaway.
Diversification Opportunities for Dairy Farm and Berkshire Hathaway
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dairy and Berkshire is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Dairy Farm 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 Dairy Farm International 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 has no effect on the direction of Dairy Farm i.e., Dairy Farm and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between Dairy Farm and Berkshire Hathaway
Assuming the 90 days trading horizon Dairy Farm is expected to generate 1272.31 times less return on investment than Berkshire Hathaway. But when comparing it to its historical volatility, Dairy Farm International is 81.77 times less risky than Berkshire Hathaway. It trades about 0.01 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 60,850,000 in Berkshire Hathaway on October 6, 2024 and sell it today you would earn a total of 4,600,000 from holding Berkshire Hathaway or generate 7.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Dairy Farm International vs. Berkshire Hathaway
Performance |
Timeline |
Dairy Farm International |
Berkshire Hathaway |
Dairy Farm and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dairy Farm and Berkshire Hathaway
The main advantage of trading using opposite Dairy Farm and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm 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.Dairy Farm vs. Cal Maine Foods | Dairy Farm vs. Delta Air Lines | Dairy Farm vs. Flowers Foods | Dairy Farm vs. US FOODS HOLDING |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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