Correlation Between CHINA HUARONG and Berkshire Hathaway

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

By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and Berkshire Hathaway, you can compare the effects of market volatilities on CHINA HUARONG 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 CHINA HUARONG with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and Berkshire Hathaway.

Diversification Opportunities for CHINA HUARONG and Berkshire Hathaway

0.18

Correlation Coefficient

CHINA HUARONG  Berkshire Hathaway

Average diversification

The 3 months correlation between CHINA and Berkshire is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and CHINA HUARONG 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 CHINA HUARONG ENERHD 50 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 CHINA HUARONG i.e., CHINA HUARONG and Berkshire Hathaway go up and down completely randomly.

Pair Corralation between CHINA HUARONG and Berkshire Hathaway

Assuming the 90 days trading horizon CHINA HUARONG is expected to generate 199.37 times less return on investment than Berkshire Hathaway. But when comparing it to its historical volatility, CHINA HUARONG ENERHD 50 is 12.25 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 0.14 of returns per unit of risk over similar time horizon. If you would invest  64,100,000  in Berkshire Hathaway on September 21, 2024 and sell it today you would earn a total of  950,000  from holding Berkshire Hathaway or generate 1.48% return on investment over 90 days.

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

CHINA HUARONG ENERHD 50  vs.  Berkshire Hathaway

CHINA HUARONG ENERHD

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA HUARONG ENERHD 50 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA HUARONG reported solid returns over the last few months and may actually be approaching a breakup point.

Berkshire Hathaway

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkshire Hathaway are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Berkshire Hathaway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA HUARONG and Berkshire Hathaway

The main advantage of trading using opposite CHINA HUARONG and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG 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 CHINA HUARONG ENERHD 50 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.