Correlation Between BG Foods and Berkshire Hathaway

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

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

Diversification Opportunities for BG Foods and Berkshire Hathaway

-0.67

Correlation Coefficient

BG Foods  Berkshire Hathaway

Excellent diversification

The 3 months correlation between DHR and Berkshire is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and BG Foods 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 BG Foods 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 BG Foods i.e., BG Foods and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between BG Foods and Berkshire Hathaway

Assuming the 90 days trading horizon BG Foods is expected to under-perform the Berkshire Hathaway. In addition to that, BG Foods is 3.13 times more volatile than Berkshire Hathaway. It trades about -0.03 of its total potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.09 per unit of volatility. If you would invest  28,675  in Berkshire Hathaway on October 25, 2024 and sell it today you would earn a total of  15,615  from holding Berkshire Hathaway or generate 54.46% return on investment over 90 days.

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

BG Foods  vs.  Berkshire Hathaway

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Berkshire Hathaway

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 5 (%) 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.

Pair Trading with BG Foods and Berkshire Hathaway

The main advantage of trading using opposite BG Foods and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BG Foods 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 BG Foods and Berkshire Hathaway 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.