Correlation Between Grupo Gigante and Berkshire Hathaway

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

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

Diversification Opportunities for Grupo Gigante and Berkshire Hathaway

0.02

Correlation Coefficient

Grupo Gigante  Berkshire Hathaway

Significant diversification

The 3 months correlation between Grupo and Berkshire is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Gigante S and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Grupo Gigante 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 Grupo Gigante S 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 Grupo Gigante i.e., Grupo Gigante and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Grupo Gigante and Berkshire Hathaway

Assuming the 90 days trading horizon Grupo Gigante is expected to generate 30.7 times less return on investment than Berkshire Hathaway. But when comparing it to its historical volatility, Grupo Gigante S is 1.14 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 0.16 of returns per unit of risk over similar time horizon. If you would invest  939,405  in Berkshire Hathaway on December 30, 2024 and sell it today you would earn a total of  135,717  from holding Berkshire Hathaway or generate 14.45% return on investment over 90 days.

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

Grupo Gigante S  vs.  Berkshire Hathaway

Grupo Gigante S

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Gigante S has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Grupo Gigante is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Berkshire Hathaway

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Berkshire Hathaway showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Gigante and Berkshire Hathaway

The main advantage of trading using opposite Grupo Gigante and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Gigante 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 Grupo Gigante S 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.