Correlation Between Swiss Life and Berkshire Hathaway

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

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

Diversification Opportunities for Swiss Life and Berkshire Hathaway

0.47

Correlation Coefficient

Swiss Life  Berkshire Hathaway

Very weak diversification

The 3 months correlation between Swiss and Berkshire is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Life Holding and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Swiss Life 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 Swiss Life Holding 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 Swiss Life i.e., Swiss Life and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between Swiss Life and Berkshire Hathaway

Assuming the 90 days trading horizon Swiss Life Holding is expected to generate 3.33 times more return on investment than Berkshire Hathaway. However, Swiss Life is 3.33 times more volatile than Berkshire Hathaway. It trades about -0.07 of its potential returns per unit of risk. Berkshire Hathaway is currently generating about -0.34 per unit of risk. If you would invest  3,840  in Swiss Life Holding on September 23, 2024 and sell it today you would lose (140.00) from holding Swiss Life Holding or give up 3.65% of portfolio value over 90 days.

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

Swiss Life Holding  vs.  Berkshire Hathaway

Swiss Life Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Berkshire Hathaway

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Berkshire Hathaway may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Swiss Life and Berkshire Hathaway

The main advantage of trading using opposite Swiss Life and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swiss Life 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 Swiss Life Holding 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.