Correlation Between British American and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Berkshire Hathaway, you can compare the effects of market volatilities on British American 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 British American with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Berkshire Hathaway.
Diversification Opportunities for British American and Berkshire Hathaway
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between British and Berkshire is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and British American 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 British American Tobacco 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 British American i.e., British American and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between British American and Berkshire Hathaway
Assuming the 90 days trading horizon British American is expected to generate 1.42 times less return on investment than Berkshire Hathaway. In addition to that, British American is 2.29 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 0.08 per unit of volatility. If you would invest 31,055 in Berkshire Hathaway on October 25, 2024 and sell it today you would earn a total of 15,120 from holding Berkshire Hathaway or generate 48.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
British American Tobacco vs. Berkshire Hathaway
Performance |
| Timeline |
| British American Tobacco |
| Berkshire Hathaway |
British American and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Berkshire Hathaway
The main advantage of trading using opposite British American and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. Electronic Arts | British American vs. STMicroelectronics NV | British American vs. LBG Media PLC | British American vs. Samsung Electronics Co |
| Berkshire Hathaway vs. Rheinmetall AG | Berkshire Hathaway vs. PPHE Hotel Group | Berkshire Hathaway vs. First Class Metals | Berkshire Hathaway vs. Jacquet Metal Service |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |