Correlation Between Transport International and Berkshire Hathaway

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

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

Diversification Opportunities for Transport International and Berkshire Hathaway

-0.36

Correlation Coefficient

Transport International  Berkshire Hathaway

Very good diversification

The 3 months correlation between Transport and Berkshire is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Transport International 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 Transport International Holdings 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 Transport International i.e., Transport International and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Transport International and Berkshire Hathaway

Assuming the 90 days horizon Transport International Holdings is expected to under-perform the Berkshire Hathaway. In addition to that, Transport International is 1.52 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 0.07 per unit of volatility. If you would invest  41,720  in Berkshire Hathaway on October 9, 2024 and sell it today you would earn a total of  2,100  from holding Berkshire Hathaway or generate 5.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Transport International Holdin  vs.  Berkshire Hathaway

Transport International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Transport International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Berkshire Hathaway

Risk-Adjusted Performance

5 of 100

Modest

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Transport International and Berkshire Hathaway

The main advantage of trading using opposite Transport International and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport International 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 Transport International Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.