Correlation Between Enstar Group and Berkshire Hathaway

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

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

Diversification Opportunities for Enstar Group and Berkshire Hathaway

0.48

Correlation Coefficient

Enstar Group  Berkshire Hathaway

Very weak diversification

The 3 months correlation between Enstar and Berkshire is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Enstar Group Limited and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Enstar Group 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 Enstar Group Limited 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 Enstar Group i.e., Enstar Group and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Enstar Group and Berkshire Hathaway

Given the investment horizon of 90 days Enstar Group Limited is expected to under-perform the Berkshire Hathaway. But the stock apears to be less risky and, when comparing its historical volatility, Enstar Group Limited is 3.01 times less risky than Berkshire Hathaway. The stock trades about -0.01 of its potential returns per unit of risk. The Berkshire Hathaway is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  71,530,000  in Berkshire Hathaway on August 30, 2024 and sell it today you would earn a total of  824,900  from holding Berkshire Hathaway or generate 1.15% return on investment over 90 days.

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

Enstar Group Limited  vs.  Berkshire Hathaway

Enstar Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enstar Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Enstar Group is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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. Despite somewhat strong basic indicators, Berkshire Hathaway is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Enstar Group and Berkshire Hathaway

The main advantage of trading using opposite Enstar Group and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enstar Group 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 Enstar Group Limited 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.