Correlation Between Sampo Oyj and Berkshire Hathaway

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

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

Diversification Opportunities for Sampo Oyj and Berkshire Hathaway

-0.5

Correlation Coefficient

Sampo Oyj  Berkshire Hathaway

Very good diversification

The 3 months correlation between Sampo and Berkshire is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sampo Oyj and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Sampo Oyj 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 Sampo Oyj 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 Sampo Oyj i.e., Sampo Oyj and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Sampo Oyj and Berkshire Hathaway

Assuming the 90 days horizon Sampo Oyj is expected to generate 79.2 times more return on investment than Berkshire Hathaway. However, Sampo Oyj is 79.2 times more volatile than Berkshire Hathaway. It trades about 0.16 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.2 per unit of risk. If you would invest  4,089  in Sampo Oyj on December 21, 2024 and sell it today you would lose (3,139) from holding Sampo Oyj or give up 76.77% of portfolio value over 90 days.

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

Sampo Oyj  vs.  Berkshire Hathaway

Sampo Oyj

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sampo Oyj are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sampo Oyj reported solid returns over the last few months and may actually be approaching a breakup point.

Berkshire Hathaway

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Berkshire Hathaway sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sampo Oyj and Berkshire Hathaway

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